At 20, the euro stumbles over the obstacles of nationalism and bureaucracy – 12/29/2018 – Market



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The euro has already shown maturity and resilience, but still faces the proverbial pain of growth.

Adopted at the beginning of 1999 by 11 of the 28 countries of the European Union, the currency now circulates in 19 of them.
It is widely accepted in the bloc where, according to recent research, 64% consider it to have a positive effect on their respective countries – even in Greece, which has experienced a very serious crisis since 2010, 60% see it with a favorable vision

The ECB's policy of low (sometimes negative) interest rates has enabled countries, firms and indebted individuals to realize substantial savings – welfare

In addition, the program The stimulus package, based on the mbadive buyout of debt and badets of countries experiencing difficulties in obtaining market lending ("quantitative easing"), has injected 2.6 trillion euros in lending. economy of the perimeter.

The initiative, which ends this year, has been (in 2015) considered by some as a symptom of excessive indulgence on the part of European authorities facing the culture of wasting some national economies .

Criticism refers to those surrounding the Maastricht Treaty, which in 1992 defined the conditions for membership. (19659002) It was stated that the candidate countries for the adoption of the currency could not register a budget deficit higher than 3% of their GDP (gross domestic product) and a public debt of more than 60% of their production of goods and services. services

However, there was already room for housing, as in the mention of the possibility of entry into the eurozone of a debt that "fell at a satisfactory pace" – l & # 39; adjective was not defined precisely. Italy, with already double the 60% of the diamond regulations, was able to join the group of the first group – and, just a few days ago, managed to escape the threat of disciplinary action by reducing its forecasts. the deficit to 2019 from 2.4% to 2.04%, despite a debt of 132% of GDP

However, the problems of the euro go beyond budgetary laxity. Professor Jerome Creel of the French Economic Observatory of Sciences Po, one of the main obstacles to the complete consolidation of the currency is the difficulty of managing the heterogeneity of the countries in which it circulates

. "

" As we do not have a solid common budget, we have no way of compensating for these differences through public policies that, for example, use a region's excess over debt and the deficit of another. "

The asymmetry is repeated in the unemployment statistics and, by extension, in the exchange rate forecasts.The high unemployment rate would like to devalue the currency in an attempt to restore its competitiveness, while the one in full employment situation has no reason to do this, among them there is a single currency that does not know which party to take, "notes Creel.

According to Mathias Hoffmann, professor at the Economics Department of the University of Zurich, it is in the banking integration of the euro area that we must move forward. There is a common oversight mechanism for the big banks (around 120), but small and medium-sized institutions are entering the "blind spot" of this case.

A safety net for at-risk banks has just been put in place with the decision to link it to the European Stability Mechanism set up in the post-Greek crisis in 2012 to help countries on the brink (or already immersed in it).

But, according to the badessment of Hoffmann, the Union should go further, with the bureaucratization dice of transnational lending of banks to companies (and not just to other banks) and the possibility of the "bankruptcy". acquisitions and mergers also beyond national limits.

It is even more important to establish a common deposit guarantee mechanism (up to 100,000 euros, or 443,000 rand). This would protect account holders from fluctuations and possible "crashes" in the most vulnerable national banking systems.

However, Germany and the Netherlands are leading the opposition to the project, fearing that they will be prompted to extinguish the fires of others at any time.

First, by the possibility of a withdrawal of the United Kingdom from the European Union (brexit) without agreement between the parties – the British Parliament refuses for the moment to approve the conditions agreed by Prime Minister Theresa May with Brussels. The divorce is scheduled for March 29th.

Although the British do not use the common currency, a "non-agreement" scenario would cause considerable disruption in trade and financial flows between the continent and the islands, as well as in the production chains.

"If this is the case, the important thing is that the European Central Bank does not try to prevent the depreciation of the common currency."

"There could be a devaluation of the pound sterling, but also of the euro." Thus, the euro area could temporarily offset the loss of activity resulting from the "no deal" with the UK. "

The election of the European Parliament should also be scheduled for the month of May of next year." A significant performance of the national-populist forces, anti-European integration.

For Creel, he this is less of a rejection of the euro and the idea of ​​continental cohesion than a rejection of fiscal and monetary policy (in short, to austerity ) carried out in recent years in the name of the euro

"A European collective project is missing. Before the play, the project was its implementation. After 20 years, this is gone, "he says.

" The intention of the French President, Emmanuel Macron, was to make this plan a rapprochement with Germany. But the enormous difficulty of Angela Merkel in forming a government after the 2017 elections has weakened it. Nothing has happened on the European front for two years, "he said.

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