Britannia Radio

The Commissioner is playing make-believe.  Nobody will take the 
slightest notice of him!

As the  head of the Centre for European Studies makes quite clear  -
the pact is already on its last legs.  "Today, it is almost entirely 
dead"

Christina
===============================
TELEGRAPH 17.2.09
Financial crisis tests European Commission authority
ANDREW WILLIS

EU economy commissioner Joaquin Almunia will this week name the first 
group of states to receive disciplinary action by Brussels for 
breaching the rules underpinning the euro.

Ahead of Wednesday's (18 January) move, the commissioner insisted 
that member states adhere to the Stability and Growth Pact, which 
requires that countries keep their budget deficits below three 
percent of GDP.

"The rules were established for everybody and must be respected," he 
said before a debate in the European Parliament on Monday.

"What they say as far as budget discipline is concerned is clear: In 
the case where countries have recorded or plan deficits above the 
three percent barrier, we must launch procedures established in the 
[EU] treaty," he added.

Of the countries up for review on Wednesday, France, Spain and Greece 
are expected to attract excessive deficit action from the commission, 
according to draft documents seen by Reuters.

The Irish deficit for 2009 is also predicted to exceed the three 
percent ceiling, according to the commission's interim forecast 
published last month.
But the biggest question is whether the commission's actions will 
have any bite as member states grapple with the effects of the 
economic crisis at home.
Karel Lannoo, head of the Centre for European Studies, a Brussels-
based think-tank, thinks the pact is already on its last legs.

"Today, it is almost entirely dead," he said of the pact, noting that 
it went into decline after 2005 when it was reformed to accommodate 
France's deficit.

Speaking about Europe's reaction to the global economic downturn, Mr 
Lannoo said that the bloc made mistakes from the very start.
"The fault was already made in October when there was no willingness 
to consider this as a European problem but rather as national 
problems," he said, adding that the European Economic Recovery Plan 
signed by EU leaders in December seemed more of an afterthought than 
a genuine attempt at co-ordination.

Since then, the EU has witnessed a barrage of unilateral actions to 
save national banks and prop-up structurally flawed industries, with 
scant regard paid to potential negative consequences for other member 
states.
French President Nicolas Sarkozy has attracted the most attention by 
calling on French car companies to relocate back to France, but he is 
by no means alone is seeking national solutions for his constituents.
"The same has been happening in the financial sector for four months 
and who is shouting about it? Almost nobody. But it's enormously 
distorting," says Mr Lannoo. "I'm surprised by the degree to which 
there is almost no willingness to challenge this."

With new initiatives being announced on an almost daily basis, the 
commission is struggling to deal with the rising number of 
protectionist attacks to the internal market.

Writing in the Financial Times last week, former Italian Prime 
Minister Giuliano Amato and former EU commissioner Emma Bonino 
outlined a credible alternative to the current approach.

Both the financial and car sectors should be declared in a state of 
crisis, they argue. Then, two task forces of national officials 
should be set up and chaired by the commission.
"Their mandate would be to co-ordinate state aid, making sure that 
national measures re-inforce each other to the greater benefit of the 
sectors concerned and avoid bending competition rules," they said.

It is doubtful whether member state governments would agree to such a 
project, however.

Eurozone problems
The single market is not the only EU pillar currently under threat. 
While the euro celebrated its 10th anniversary last month and 
welcomed Slovakia as its newest member, the eurozone itself has been 
put under great pressure by the unfolding crisis.

One of the biggest issues is spread in rates offered on government 
bonds. Markets have grown increasingly uneasy over ballooning 
government deficits in recent weeks, prompting investors to demand 
higher yields when buying sovereign debt from EU states whose 
finances are perceived as vulnerable.

The subsequent rise in borrowing costs increases the threat of a 
national default, prompting the question of whether such an event 
could cause a current member to leave the eurozone.
"The probability of this split is zero. The list of members to join 
the euro is very long," Mr Almunia told MEPs on Monday in an apparent 
attempt to quash such speculation.  [Has he checked their enthusiasm 
lately?  If there's no bail-out from the EU they won't join! -cs]

Mr Lannoo has a more nuanced approach. "Every country will ask 
itself: 'Is it better that I stay inside [the eurozone] or is it 
better that I go outside?'" he said, referring to the cheaper 
financing of public debt enjoyed by euro members versus the option of 
currency devaluation enjoyed by non-members.

Euro-bond idea
In the meantime, calls for a "euro-bond," first suggested by Italian 
finance minister Giulio Tremonti, are likely to go unanswered, with 
Germany baulking at the idea of picking up the bill.  [There's not a 
hope in hell of that.  Germany has vast debts from eastern Europe 
which is  now collapsing! -cs]

Yields on a common "euro-bond" used by all eurozone states would be 
significantly lower than those currently paid by a number of 
peripheral countries, as the risk of a eurozone default is highly 
unlikely. However "euro-bond" yields would probably exceed those 
currently paid by Germany.
Instead, member states could start by co-ordinating their bond 
issuance calendars to reduce competition between countries attempting 
to raise capital.

To some, greater co-ordination at the EU level would seem to be a 
solution for much of the EU's current woes but it is hard to see 
where this would come from.