Many years ago there was a television programme entitled The Generation Game. Towards the end of each show the successful contestant sat in front of a conveyor belt along which moved the prizes. Once the prizes had been removed from view the contestant received the prizes he/she could name.
looking at the travails within the EU and the eurozone I feel like one of the contestants in The Generation Game. Instead of prizes, problems pass in a procession before our eyes: Greece, Spain, Italy, Portugal, ECB balance sheet, fiscal pact, Hungary, Tobin tax, French presidential election. There may be others, which I cannot recall.
Following the spectacular Greek default, which Sarkozy stated had 'solved' the problem, comes more bad news. According to Reuters:
Greece is going to need to make even deeper cuts to public spending to meet targets agreed with the EU and IMF in its latest bail-out, according to a European Commission report seen by Reuters.
The news agency reports that the Commission's report says Greece needs to cut spending over 2013 and 2014 by a further 5.5pc of GDP.
The financial crisis and government cuts in Greece have already driven the country's economy into a deep recession and sparked a wave of public protests, and led to many economists questioning whether the scale of cuts required by the bail-out package can ever be achieved. Source: Daily Telegraph
The EU is seeking to penalise Hungary. EU finance ministers are preparing to freeze half a billion euros in financial aid to the country, as a punishment for Hungary failing to adhere to budget rules. It is reported that a final decision on this may be deferred until June,
The big issue today is the proposal for a Tobin tax or Financial Transactions Tax. Quite apart from UK opposition to this tax proposal there is no consensus amongst other EU countries. Should the tax be EU wide or limited to euorzone countries? Two interesting articles from Spiegel:
However the major issue is how the EU/EC will respond to Spain.
Eurozone finance ministers also turned their attention to Spain's deficit, saying in a statement that the country should strive for a 5.3pc deficit target this year, cutting it some slack from the initial goal but keeping the pressure on.
Spain was supposed to cut its deficit to 4.4 percent of gross domestic product this year, but said it would only aim for 5.8pc as it heads into recession. Its deficit in 2011 was 8.5pc, far above a 6pc goal.
"The Spanish government expressed its readiness to consider this in the further budgetary process," it said. Source: Daily Telegraph.
Note the difference in language used towards Spain than that used towards Greece. Spain has a far bigger economy than Greece and is not to be bullied. The following article is well worth perusal as it sets out the Spanish position well:
Should Hollande win the French presidential election he will be an ally of Spain. Hollande has stated he wishes to see a major revision of the fiscal pact.
Just come across this interesting article in The New York Times.