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Thursday, May 06, 2010

The truth about EMU conditions

The European Commissioner for Trade, Karel De Gucht, is one of the more candid people in Brussels (he infamously once referred to the Dutch Prime Minister Jan Peter Balkenende as "a mix between Harry Potter and a rigid bourgeois without charisma" - a comment which didn't go down particularly well in the Netherlands for understandable reasons).

Yesterday De Gucht was at it again, admitting what most sober commentators have suspected for some time: all EU leaders were all along aware of the fact that the Greek government was providing false data, from the very beginning of the country's euro-membership. According to El Pais, De Gucht said:
We knew that Greece was cheating, it was clear as soon as they joined that there was something wrong [with their figures].
So much for the strict rules attached to euro-membership - and the guarantee from then Governor of the Bank of France, Jean-Claude Trichet (now ECB President), who said in 1997:

The thrust of the spirit and of the letter of the Treaty is that everything is done to construct the euro area as an optimum currency area. First by ensuring that it incorporates economies that have already proved being convergent in the fiscal field as well as in the monetary and financial fields.
Not to mention Lib-Dem leader Nick Clegg's embarrassingly flawed assertion last year that the UK should join the euro precisely because of the robust conditions attached to membership:
The strict rules attached to the euro could emerge as one of the best ways to persuade the markets that we will put Humpty Dumpty back together again, put the public finances in order.
The fact is that much like the more fragile financial institutions in the crisis, the stability of the eurozone was always predicated on semi-fictional data and an unsustainable economic model (as Tony Barber points out on his Brussels blog, only Standard & Poor’s, the ratings agency, was sober enough in the pre-crisis era to suggest that the politicians’ and markets’ confidence in Greece was misplaced). The financial melt-down and the soveriegn debt crisis, now plaguing the eurozone, taught us that grand economic projects built on sand just won't survive in the long run.

It sounds so obvious. Question is, will EU politicans learn the lesson?

1 comment:

Anonymous said...

following the link from the e-mail, for comments on

"Eurozone leaders meet today to discuss proposals to give the EU more powers over economic policy, including giving eurozone finance ministers the mandate to approve national budgets in the eurozone through a majority vote.

this is very alarming