Eurozone Watch

A poll published today by the Financial Times reveals that a large majority of citizens in the big eurozone countries think that the euro has had a negative impact on their national economies. An example: Almost two thirds of the Germans still say they would prefer the D-Mark over the euro – eight years after the start of EMU, and five years after the introduction of euro notes and coins. And only five percent of the French think the euro has had a positive effect on the French economy. Along with data from other eurozone countries such as Spain and Italy, these figures confirm a known trend: the advantages of European monetary integration are largely underestimated.

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While most reporting on the US at the moment focuses on President George W. Bush's plans of a surge in troop presence in Iraq, a number of other interesting political developments are happening in Washington, DC – developments from which the Eurozone could draw some important lessons for its own governance.

One field in which Europe could learn is fiscal policy, more specific the so called "paygo" rule which the American Congress has voted on in early January, even before it began its core legislative agenda. According to this rule, any legislation of discretionary spending increases or tax cuts has to be financed by cuts in other spending or increases in other taxes. (Only military spending is exempted from this rule.)

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Alert readers of Eurozone Watch may already have noticed the link to www.eurointelligence.com in Sebastian’s post on the growth outlook of the German economy a couple of weeks ago. What was then in its trial phase is now officially open to the wider public: A new website covering the euro-area.

The new site is run by Wolfgang Munchau, a well-known columnist for the Financial Times and former editor-in-chief of the Financial Times Deutschland and Susanne Mundschenk, an economist specialized in issues of monetary integration, especially EMU.

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This is the second part of our Eurozone Watch outlook on 2007. We discuss the impact of major political events in EMU member countries and assess potential developments in EMU economic governance in the next twelve months. Read our outlook on the EMU's economic developments in 2007 here.

Will the French Presidential elections have an impact on EMU economic governance in 2007?  

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With business and political life slowly returning to normal after the holidays, focus has shifted again towards political and economic developments to come in 2007. The founders of Eurozone Watch have taken a deep look into their crystal ball and present their findings in two posts, one on economic developments in EMU (this post) and one on political developments (to be published later this week).

Will the upswing in the eurozone continue?

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