Eurozone Watch

This is a slightly extended and updated English version of an op-ed I published in the Financial Times Deutschland on July 24, 2008. A more detailed analysis of the implications of the Irish “No” for the French Presidency was published on Eurointelligence.

4th part of our series on the EU after the Irish No to the Lisbon Treaty  

The Irish „No“ to the Lisbon-Treaty is more problematic for the French EU-Presidency than Sarkozy’s previous comments would suggest. This, at least, the French President’s visit to Dublin last Monday has shown. His trip was widely deemed a success – although perhaps only because he desisted from stirring up further tensions with the Irish. At best, he may even have calmed Irish anger over the remarks he made last week regarding the likelihood of a second Irish referendum.

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The global downturn has now hit Europe with its full force. Today, not only PMIs fell across the euro-zone. Also the German ifo-index took a bad hit, experiencing the largest one-month-drop since the recession of 2001. Both the expectations as well as the current conditions index dropped sharply. The expectations component is now not far away from levels seen during the last recessions.

Suddenly, even the German economy does not look as resilient any more as it was long claimed by some observers (see my post here on false complacency concerning the strong euro). Nevertheless, Germany still looks strong compared to the rest of Europe: According to the PMI surveys, the German manufacturing sector is merely stagnating while the sector in most of the rest of Europe already is in recession.

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3rd part of our series on the EU after the Irish No to the Lisbon Treaty  

The economic outlook for the euro area is deteriorating fast: This week has brought a number of new indicators pointing at a sharp slow-down ahead. Not only are signs mounting that the first countries on the fringe of the euro area such as Ireland and Spain may now be in recession, but there are now also some first indications that Germany, long seen as the most robust economy of the euro area at the moment, is also heading for a significant slowdown. Negotiations on an new protocol to complement the Lisbon Treaty or on a revised version of the Treaty will hence take place in a difficult economic setting. This could turn out to be particularly problematic for Ireland, which may face a second referendum on the Lisbon Treaty.

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2nd part of our series on the EU after the Irish No to the Lisbon Treaty  

The European Council on June 19/20, 2008 did not indicate a way out of the EU crisis which resurfaced with the Irish „No“ to the Lisbon Treaty on June 12, 2008. Nevertheless, one or two likely options are being sketched on the horizon.

Option one is to provide Ireland with a protocol to the Lisbon Treaty, which takes into account Ireland’s most important problems with the Treaty and possibly grants certain opt-outs of community policies. We discussed this scenario, which seems to have the largest support among EU member states at the moment here, explaining why the double-Nice-referendum of 2001/2002 cannot simply be repeated.

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