Eurozone needs more practical way out than unified economic gov't

Xinhua news agency, China Daily, 06.09.2011

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The ceaseless debt crisis in eurozone illustrated deep-rooted structural problems, i.e. discrepancy between independent national governments and a unified monetary policy.

There are calls to set up a "eurozone economic government," but it may prove unrealistic and some analysts suggested milder and step-by-step approach in tackling the problem.

Unlike the United States where we first saw rifts between government and legislation on deficit reduction, and unified action once a deal was hit, Europe has to work its way out slowly.

"We've seen many concrete things, we see EFSF, we see 'Euro semester', we see 'Euro Plus Pact', 'Six Pack' and 'Growth And Stability Pack'. Those are steps towards closer coordination." said Janis A. Emmanouilidis, senior policy analyst with European Policy Center (EPC), a well known European think-tank. [...]

But the reality is that a physical economy entity on EU's level is not likely foreseeable in the near term. And decision-makers may continue to adopt a typical European way, i.e. through increased mutual supervision and coordination on EU level, instead of consolidating fiscal authorities to a single entity.

"There is a limit of transferring national sovereignty, there is always political concerns in the national governments." said Emmanouilidis. "What we are going to see is some incremental reforms, and in the end we may see closer economic governance, but it is different from something on the national level."

"That's what we saw in the past months. We found various measures written in different treaties or resolutions. The EU's structural reform is carried out like making a mosaic, which is composed of many pieces of small colorful glass. So the first task is to collect those pieces," said the expert. [...]

"The problem is that it usually takes a lot of time to decide it, and it takes a long time to implement it, especially in ratifying it on the national level." Emmanouilidis said. "Generally speaking, when the car hits the wall, decisions are made. Like the case in 21st of July, in which decisions were made quickly, which was unthinkable in early July." [...]

Emmanouilidis also admits that this is a difficult process. "The euro structure is very complicated, and changes to be done can be very costly, especially for those who are providing assistance."

"It will be an incremental progress, an evolution, not a revolution," he said. [...]

For the entire article see here.


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