Worries over eurozone growing. Euro at risk ?

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Worries over eurozone growing at Commission
Reuters/Berlin
23 Jan 2010

Worry is growing at the European Union’s executive branch that some countries’ surging budget deficits could undermine the bloc’s monetary union, a German magazine reported yesterday.

Der Spiegel quoted a draft report from the European Commission as saying the growing imbalances could put the common currency at risk.

“(The imbalances) weaken trust in the euro and endanger the cohesion of the monetary union,” the magazine reported the draft report to finance ministers of eurozone countries as saying.

It went on to cite competitiveness gaps between eurozone member states as a factor that threatened the group as a whole.

European Central Bank policymaker Juergen Stark said yesterday that countries like Greece, which is battling to get its budget under control, must also reform its economy to make it more competitive.

 

[GoFlyKiteNow]

Greek Debt Crisis Forces EU to Face Difficult Choices
January 24, 2010

Brussels. There is no such thing as the United States of Europe, but are the continent’s national leaders beginning to wonder if there might not have to be to avoid another Greek debt crisis?

When the 27 countries that make up the European Union gather next month to shape common economic planning for the next decade, the strains Athens has placed on its core currency could find far-reaching effects.

Certainly, allowing Brussels to poke its nose into national statistical reporting — as is being mooted — is unlikely to be the last direct consequence of Greek profligacy for EU-wide governance.

Europe’s economic integration remains unfinished, principally held back by an instinct for political disintegration.

Yet suddenly the risk of wayward, peripheral members of the club toppling the entire house of cards appears very real to those at the heart of the Brussels enterprise, and the talk on Feb. 11 will be of lessons to be learnt fast.

“Let us be clear: in the past, some national politicians have resisted stronger mechanisms of governance” in Brussels, Jose Manuel Barroso, who heads the European Commission, the body that drafts and enforces EU laws, said last week.

“I hope that all EU governments will now recognize the need for full ownership of Europe 2020 and for a truly coordinated and coherent action in economic policy,” he said, referring to a new strategic framework.

It is not new, but Greece easily represents “a turning-point in the history of monetary union,” which was the 1999 creation of the shared euro currency, says Royal Bank of Scotland economist Jacques Cailloux.

“This is an unprecedented situation, testing the system itself,” Cailloux said of the sharp upward revision of deficit levels by Athens when its new government came in late last year.

“Europe’s responses will shape budgetary coordination for decades to come,” he added.

Barroso’s commission will be able to implement a new five-year mandate the day before national leaders assemble in Brussels.

Obtaining the right to “audit” member states is “a first step” towards “a much more centralized system of budgetary coordination,” explained Cailloux.

Dubious markets are having none of Greece’s promises to simply fill its budgetary black hole itself. Athens now has to offer more than three times as much as Germany to attract international lending.

The problem, as ever, is one of “the transfer of sovereignty” from national capitals to Brussels, Belgium’s Finance Minister Didier Reynders said.

And yet, the need to come up with a “more efficient organization” across the bloc means that he for one is pushing for “greater integration of our political economies” to reflect that of its monetary pillar, the European Central Bank.

While one high-ranking diplomat expressed agreement with stated Spanish desires to strengthen economic governance, at least across the 16 countries that share the euro, fierce obstacles — not least London — remain.