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Economy: Edgy Times In EU

  • December 5th, 2010
  • Posted by EUEditor

eu-symbol-coins.jpgCaution rules in an uneasy economic climate, as the EU works on with the emergency plan.

Consultations are in train ahead of the end-of-year European Union summit (16-17.12.10) towards settlement of its standing mechanism for management of financial crises; decisions of the European Central Bank (ECB), markets, and immediate problems in Ireland, Portugal and Spain, feeding into the mix.

The European Central Bank president, Jean-Claude Trichet, was calling on national governments (3.12.10) to be “flexible” by implementing strong measures to cut their deficits.

It follows the meeting of the ECB this week (2.12.10) which determined to continue making available cheap funds for banks, in support of governments wrestling with sovereign debt, though without indicating definite figures, nor for how long.

It affirmed that the 16 members of the “Eurozone”, the countries using the Euro currency, were determined to maintain it.

Prices jumped on European stock markets after that move, after a month of weak performances, but were checked again on news of fresh, higher unemployment figures in the United States.

Commentary in the Brussels-based European Voice outlined some of the consultations set for the coming week:

“Uncertainty hangs over Portugal and Spain’s chances of avoiding emergency calls on international assistance to meet their immediate financing needs …

“When eurozone finance ministers meet in Brussels on Monday (6.12.10) they will be obliged to plan their next steps  without knowing whether Ireland can count on the €85 billion package they offered it just over a week ago.

“Not until Tuesday (7.12.10) will the weakened Irish government put to a vote the four-year austerity budget on which the loan – and the recovery of its fiscal equilibrium – depends, and the outcome is still uncertain.

“Yesterday (1.12.10) the European Commission extended by one year its special state-aid rules for banks, recognising that they continued to need government help…”

The summit of Heads of Government will be a new edition of the summit at the end of October, where the emergency package was approved, but with definite qualifications.

“The crisis mechanism will only be valid for cases where the stability of the Euro as a whole is under threat”, said the German Chancellor, Angela Merkel, at that time – mindful of unrest in Germany over the likely costs to the home economy, still the most-robust creditor.

It was stressed that governments failing to keep to the budgetary rules for maintaining the currency would be penalised.

Finance Ministers of the Eurozone countries were sent then to resolve the content of the 2011 EU budget with the European Parliament.

This week, overall budget increases of 2.9% were agreed to, necessitating substantial cuts in certain areas.

The parliamentary side had wanted more, but pressed towards agreements giving them a stronger say in future parleys.

The Finance Ministers are to met again on Monday (6.12.10) with hopes of meeting deadlines for getting the budget in palace.

See, EUAustralia Online: “EU Summit: Controlling deficits / debt”, 29.10.10; “Irish money, EU budget – in doubt”, 18.11.10.

Reference

Constant Brand, “Member states back 2011 budget proposal”. European Voice, Brussels, 2.12.10. http://www.europeanvoice.com/article/2010/12/member-states-back-2011-budget-proposal/69634.aspx, (4.12.10).

European Council, “Council of the European Union, Brussels, 16.12.10, NOTE, Annotated Agenda …”, 12345/10, 10EUR-PREP44.
http://register.consilium.europa.eu/pdf/en/10/st12/st12345.en10.pdf, (4.12.10).

Sarah Jones, “European Stocks Surge Most in Three Months …”, Bloomberg. NY, 2.12.10. http://www.bloomberg.com/news/2010-12-01/european-u-s-stock-index-futures-rise-bhp-billiton-rio-tinto-may-gain.html, (4.12.10).

Elena Moya, “European Central Bank chief urges eurozone nations to cut budgets”, The Guardian, Manchester, 3.12.10. http://www.guardian.co.uk/business/2010/dec/03/trichet-in-eurozone-budget-cut-call, (4.12.10).

Simon Taylor and Ian Wishart, “Uncertainties continue to dog euro rescue plan”, European Voice, Brussels, 2.12.10. http://www.europeanvoice.com/article/imported/uncertainties-continue-to-dog-euro-rescue-plan/69628.aspx, (4.12.10).

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