Eurozone Watch

We know how limited the influence of the European Parliament (EP) is in the shaping of the EU’s economic policy and in managing the current financial and economic crisis. And we also know that what parties say before parliamentary elections is not necessarily the policy they implement afterwards, especially not if it is the EP that it is elected.
But still: we decided to take a look at the positions of the major parties on economic and financial issues and in particular whether there is an EMU dimension to what they have to say. Afterall, the Parliamentary Committee on Monetary and Financial Affairs since the start of EMU has become more and more active, in particular in its dialogue both with the ECB and the Eurogroup President, and it has in the past issued reports on the reform of EMU governance. Hence we publish a review of the major parties' positions on economic governance.

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The German Foreign Secretary and social democratic candidate for the Chancellors office in the next general elections in September 2009 has finally formulated some ideas on the future of Eurozone governance. Unexpected by many who had given up hope that the SPD candidate would pronounce himself on this matter before the European and German elections, he devoted 10 lines of yesterday’s speech in Budapest to EMU – and has departed in at least six aspects from the position on EMU the grand coalition has been holding before and during the current crisis.

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Fifth part of our series on the winners and losers of the current crisis

If there was someone profiting from the current economic and financial crisis it must be Barack Obama, the new American president, right? The polls before the elections showed clearly: the economic situation was the most important election issue.

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For a few weeks now, the debate about whether a bail out of an EMU country is a likely option has accelerated. A few days after we had argued in a syndicated piece for Project Syndicate which was printed by a number of papers across the world that the no-bail-out clause has no relevance in the current crisis and EU member states would bail out a EMU member with solvency or liquidity problems. Germany’s Finance Minister recently added flavour to the debate. Only yesterday, it was reported that Steinbrück confirmed that EMU countries might bail-out a fellow euro-area country (read for instance Bloomberg on this).

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Fourth part of our series on the winners and losers of the current crisis

Before the financial crisis struck, the German finance minister Peer Steinbrück had a very ambitious goal. He wanted to enter history books as the finance minister who managed to oversee the first federal budget in Germany without new borrowings in a generation.

This dream is now shattered. As the Financial Times Deutschland pointedly remarked a few weeks back, Mr. Steinbrück is now entering history books as the finance minister who has overseen the largest federal budget deficit ever: With the government's stimulus package of about €50bn, the German government is now set to borrow as much as never before in euro terms.

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Third part of our series on the winners and losers of the current crisis

Despite certain doubts about the Eurozone's ability to tackle the crisis, the attraction of the Euro as a "safe haven" in an era of turbulence has risen considerably for the non-participating EU countries. Even the UK and Denmark, which have negotiated an Opt-Out in the Maastricht Treaty, debate a possible EMU membership.

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Second part of our series on the winners and losers of the current crisis 

Only a few months ago, most observers would have been very sceptical whether the Lisbon Treaty could be saved with a second Irish referendum. While now property prices in Dublin are falling like bricks and unemployment and the budget deficits are skyrocketing, also the mood towards the Lisbon Treaty has changed.

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First part of our series on the winners and losers of the current crisis 

Continental watchers of British politics have been surprised by the recent rehabilitation of the British Prime Minister. During the summer recess, the UK media had, after all, been alive with speculation that Gordon Brown would be deposed by his own party. To all intents and purposes, Brown was a political zombie. Yet, as the country’s financial crisis deepened, this speculation lulled. Brown was given a new lease of political life.

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With the world economy tumbling ever deeper into the economic abyss, it is exceedingly hard to find a single positive aspect of the crisis. Given the speed and momentum the downturn has reached, no sector of the economy seems immune to the fall-out of the contraction. Orders are being cancelled everywhere and business is down from manufacturing to services, even if the last are yet less affected.

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These days, the world is stunned by the German reaction to the global financial crisis: While around the world, policy makers rush to pass stimulus packages worth hundreds of billions of dollars and several percentage points of their countries’ respective GDP, the German government is sitting on its hands. While it has passed some measures which supposedly will stimulate demand somewhat, the volumes involved are miniscule. Most observers agree that the measures passed by the German government add up to significantly less than €10bn, some estimates are as low as 0.2 percent of German GDP – an impact you would usually even have a hard time to measure. What is worse, the government does not even seriously seem to consider quick action. Ms Merkel has just recently announced that she wants to take a look at the effects from the measures taken so far only in January before deciding on additional steps. Not only the international press (i.e. the Economist), but also national media is now heavily criticizing the government’s hesitant approach.

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