Stephanomics: “That is getting very close to a fiscal union…”

While our focus was on the Prime Ministerial negotiations, the European Commission was moving to shore up the eurozone – agreeing emergency measures worth €750billion ($975bn, £650bn).

That’s on top of the earlier € 110billion three-year bail-out package to rescue Greece’s economy agreed with the IMF.

Ireland’s contribution to that earlier plan, providing for bilateral loans up to € 1.312 billion from Ireland to Greece, is due to go before the Dáil next week.

As, still everyone’s hero, Robert Peston warned on Monday

The actual loans and guarantees may turn out to be harder to deliver than the words of comfort from eurozone government heads.

Second, 750bn euros is just over one-year’s new borrowing by eurozone members and a bit more than 10% of eurozone government debt. So it’s certainly not enough if investors were to start to lose confidence in the ability of some big countries – such as Spain or Italy – to honour their debts.

Which takes us to the import third caveat. In the end, there won’t be a cure for the underlying eurozone strains unless and until the record, unsustainable deficits of some eurozone members are reduced in a permanent way.

Those concerns were shared by Karl Whelan at The Irish Economy blog

Regarding those deficits, earlier today, Spain’s Prime Minister, Jose Luis Rodriguez Zapatero, announced “a 5% cut to public sector salaries, as well as reductions to pensions and regional government funding.”

And in today’s Irish Times, Derek Scally warns that “German cities are drowning in debt, with no way to save themselves.”

But, also on Monday, the BBC’s Stephanie Flanders made this observation

If we are to take this package at face value, the rules of European Monetary Union have been fundamentally re-written. For governments, being in the eurozone means something very different today than it did just a few weeks ago.

As we have seen, the role and responsibilities of the European Central Bank (ECB) have changed radically as well.

If this deal is what it is cracked up to be, countries like Germany may have to fundamentally change the way they think about monetary union – and, ultimately, the way they think about economic growth as well.

And in an update to that post she noted

That is getting very close to a fiscal union, at least in terms of the implicit liability for core members like Germany over the next few years. Whether they will be getting a more stable eurozone economy in return for that new liability is still today an open question.

And on that point of an ever closer fiscal union, RTÉ reports today

The European Commission has proposed that eurozone countries submit their national budgets to the EU for ‘peer review’ before they go to national parliaments. [added emphasis]

The Commission also said it would call on national leaders to agree a permanent crisis resolution mechanism.

….

It said the time had come to draw ‘far-reaching lessons’ about the way economic policies were dealt with.

Adds The Irish Economy has more on the EU Commission proposals.

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  • Argosjohn

    How much are the Stormont jokers giving? Or are they perpetual pan handlers?
    Let’s hope the Tory Lib Dems put the boot in and squeeze the Orange state.

  • Grow the private sector is the clarion call of all governments which do not have the intellect to create industry and employment for/from human energy. And the private sector which may have such intellectual property are nearly always hampered by having to seek funding from those who are not intellectually equipped to understand, or are politically or competitively opposed to a novel program which can fundamentally alter the status quo and its gravy train power lines.

    But spelling it out in simple text that even a child could understand will render the blockage on progress busted and the future different from the past, which is only natural in growth and changed days.

    And you may like to consider this ……

    [quote]
    Posted by AmanfromMars on 5/12/2010 11:14:01 AM

    Surely the penny must be dropping by now …. The control of easily printed paper currency/its free supply [quantitative easing] and subjective halting puts you in control of human lives and makes you responsible for all that ails the planet, as paper currency can easily purchase whatever is needed to fix everything. [who cares if it is only practically worthless paper if it does the business with some fancy writing with a currency number on it]

    And that would be putting the Power Elite and fat cat ivory tower bankers firmly in the frame for special attention. And it is no wonder they don’t like this development, and this one too …… http://www.latimes.com/business/la-fi-0512-financial-overhaul-20100512,0,3266419.story

    http://thedailybell.com/1042/German-Backlash-Strikes-EU.html%5B/quote%5D

    So what plans have the boys and girls in Stormont got for growing the private sector or are they just going to rely on raiding the Public Purse to pay themselves and their public sector colleagues even as the Public tell them that they are paying for no more schemes. If you want money for stuff and nonsense, go to the Bank for that is where All the Money goes and where Fools can Lose Trillions and not a Word is said other than please can we have more. And the Idiots server the Fools with Flash cash invented from thin air to play their pathetic little games again at everyone’s expense?

    The problem for such Fools and Idiots nowadays though, is that everyone is getting smarter, quicker, and the old ways of doing things to enslave with money are no longer accepted or acceptable ….. and how the Ponzi Monetary System works has been cracked and hacked wide open and is catastrophically vulnerable to meltdown attack and/or rogue exploitation.

  • A preview button for posts would be a very welcome addition, as would be some html tagging as per the old Slugger format. It would certainly help for a clearer presentation of sometimes more complicated posts.

  • Greenflag

    I’ll second the Martian’s call for a preview button .

  • The Raven

    Squeeze the Orange State? That would be the one where just as many Catholics as Protestants will get hurt by spending cuts?

    Just checking. I wondered perhaps if Call-me-Dave and #itsallNickCleggsfault had special cuts for Protestants….

  • The Raven

    “If you want money for stuff and nonsense, go to the Bank for that is where All the Money goes and where Fools can Lose Trillions and not a Word is said other than please can we have more.”

    Except they can’t. For the Banks are not Lending to the Fools and All the Money seems to stay in their Vaults, as the increasing piles of emails in my in-tray seem to suggest, those being from small businesses who errrrrm aren’t getting any errrrr Money.

  • Pete Baker

    As an aid to focus on the actual topic I’ve emphasised part of the RTÉ report in the original post

    “The European Commission has proposed that eurozone countries submit their national budgets to the EU for ‘peer review’ before they go to national parliaments.”

  • David

    Well, stepping aside from the nationalistic and religious jingoism that this type of discussion always seems to “inspire”…

    It’s my view that monetary union (the Euro) without fiscal union was always, and will always, be likely to end in disaster. It’s nothing to do with nationality or religion butrather the way economies work overlaid with an icing of political expediency.

    It’s my view that the Euro may well fail. Not because I want it to but rather because the fiscally stable nations of Europe (including Britain) will always be at odds with profligate and ultimately economically unstable nations like Greece, Spain, Italy and Portugal. Without massive change in those countries the implications of the agreement signed suggest to me that they will continue with their bankrupt economics in the expectation that someone will always provide some kind of safety net.

    It’s my opinion that Greece should have been ejected from the Euro and left to default on its debts. That would have have been better for them in the long run and made defending other countries easier without them being made to believe that a safety blanket will always be made available in the future.

  • Except they can’t. For the Banks are not Lending to the Fools and All the Money seems to stay in their Vaults, as the increasing piles of emails in my in-tray seem to suggest, those being from small businesses who errrrrm aren’t getting any errrrr Money.” ….. The Raven says: 12 May 2010 at 8:08 pm.

    What possible good use then, The Raven, are Banks and Bankers, should they be ignorantly petrified to disburse the funds they have been given to ……. well, lend and grow the economy and private sector ideally, I suppose, rather than cover the losses of their wild and destructive gambles and trades in deep fields of intellectual property endeavour way beyond their ken and pay grade. They do say that a fool and their monies are easily parted and to lose trillions in markets which one would reasonably have expected to be sympathetic to ones presence and dealings, would suggest the jumped up suits in the System are as important and as smart as minnows in shark infested waters.

    The Duped and Duping Bankers are the Fools and the System which invents from nothing great artificial wealth and gives it to Fools who then keep it as a nestegg and poker stake for themselves, rather than providing such an enabling Tool [Free Finance/Flash Funding] directly to Future Able Builders, are the Idiots.

    But both the Fool and the Idiot can effectively immediately change their spots with the SMART Support of Able Future Able Builders who are also into SMARTer Support of former Fools and Idiots in a System which has a very particular and peculiar Systemic Flaw which is Extremely Easily Exploited and Championed or Used and Abused.

    I wonder what the new Alliance and Liberal Conservative Coalition of the Ready, Willing and Enabled to Govern Government are Planning and are they Future Able Builder fans?

    I suppose one would just need to ask them in order to discover all that they have to offer. I wonder what the First and Deputy First Ministers Offices offer in that Sector, other than that which they presently deliver ….. to ignore and decline to engage or even acknowledge direct electronic correspondence on the subject, lest the be duty bound by virtue of their Public Office to proceed.

  • Garza

    bitter much?

  • Anonymous

    And the chances of that proposal flying are…….?

    I suggest it’s about on par with a pig.

  • jimhas

    “It’s my view that the Euro may well fail. Not because I want it to but rather because the fiscally stable nations of Europe (including Britain)”

    Include Britain at your cost..