Saturday, May 15, 2010

Trichet Wants 'Quantum Leap' in EU Budget Control

Never waste a good crisis to promote your unpopular agendas.

Jean-Claude "Rahm Emanuel" Trichet wants (barely-)sovereign nations in eurozone to adopt a tighter fiscal union to prevent "bad behavior" like racking up too much debt. The European Commission president José Manuel Barroso, a Portugese, has already proposed a "peer review" process for budget of not just PIIGS but all enrozone members.

Trichet Wants ‘Quantum Leap’ in Euro Budget Control (Richard Weiss and Mark Deen, 5/15/2010 Bloomberg)

"May 15 (Bloomberg) -- European Central Bank President Jean- Claude Trichet called for a “quantum leap” in the way euro- area nations set their budgets and defended his decision to buy bonds from debt-saddled countries such as Greece and Portugal.

"“There is a need for a quantum leap in the governance of the euro area,” Trichet said in an interview with Spiegel magazine published on the ECB website. “There need to be major improvements to prevent bad behavior, to ensure effective implementation of the recommendations made by peers and ensure real and effective sanctions in the case of breaches,” he said.

"Trichet, who said the current crisis may be worse than the Great Depression, is fending off critics who say the ECB caved into political pressure as the sovereign-debt crisis stirred speculation that Europe’s single currency may break up.

"While the 16 members of the euro share a common monetary policy, members are responsible for their own fiscal decisions. That allowed Greece’s budget deficit to reach almost 14 percent of its gross domestic product, exceeding the EU’s 3 percent limit without penalty. Germany’s is 3.2 percent of its GDP.

"Trichet’s move came in tandem with a decision by European Union nations to push through a $1 trillion aid package to support members of the club who face the highest borrowing costs. The ECB’s debt purchases helped push down two-year bond yields over the course of the past week, making it less expensive for indebted nations to finance themselves." [The article continues.]

It is almost absurd to talk about "a common monetary policy" of the eurozone, as there's hardly anything common about the 16 eurozone member countries other than they are located on the European continent.

Euro, a political currency created for wealth transfer from productive nations (think Germany) to not-so-productive nations (think PIIGS) (that's my humble opinion, more in a later post), remains a political tool to force the EU political integration whether the peoples in the member countries like it or not.

The European Commission as executive body, the ECB the central bank, the Council of the European Union and the European Parliament as legislative body, the Court of Justice of the European Communities as judicial body. Sovereignty? What a quaint, 20th century idea!

Never waste a good crisis. Or if there is no crisis, create one.

It should be Germany, not France, who should be threatening to pull out of euro.


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