Written by Tendenzias

Creation of the euro: twenty years later

  The lack of cohesion in the policy budget has led to incredible excesses of public finances in most EU countries. The deterioration of the debtor countries of the euro area, we refer to the situation that existed before the creation of the euro, when each country had its own national currency. The differences in rates observed between the giant countries of the Euro area refers to the situation not only before the actual creation of the single currency in 1999, but in early 1990 before the period of convergence of interest in the launch of the single currency. The fact that is that the spreads on government bonds to ten years is about 1.55 percentage points (155 basis points) between France and Germany, or Italy and Spain to borrow around 6.5% existed twenty years ago. With regards to the existence of wage differentials between euro area countries, we refer to a situation comparable to that which we have known before the Maastricht Treaty of December 10, 1991, when each EU country had its own national currency. Finance laws in the eyes of the European Commission This failure of the euro is due to the lack of a common economy, fiscal situation and budget. This lack of cohesion has led to incredible excesses of public finances in most EU countries. This site of the European convergence is the situation which must now be faced. The current European Commission proposals, directly inspired by the German leader, expected to find greater unity in the euro area. These proposals must be submitted today, which should lead to decisions at the next Summit scheduled for December 9, have a clear objective: to strengthen the powers of the Commission, which wants to try the financial law of the Member States before the vote by national parliaments. This is exactly what should have been set up in 1991 during the negotiation of the Maastricht Treaty. This has led to a huge mess! France and Germany will soon present proposals on the reform of the Treaties of the European Union, Nicolas Sarkozy said Tuesday. It is now a matter of allowing greater integration of policies in the euro area, he said. With Angela Merkel he will soon submit proposals to amend the Treaty so that countries may differ in the budget, economy and taxation,” said the French president at the Boao Forum for Asia, at the Elysee. “No country is immune from the consequences of advanced excessive debt accumulated over the years,” he said. The French president said that the EU had decided to act by increasing the impact force of the European Financial Stability Fund (EFSF) to 1000 billion euros through a lever mechanism. It has welcomed the intervention of the European Central Bank in the secondary market sovereign debt. “We are pleased that the ECB has implemented its program of buying securities on the secondary market for the correct operation of the transmission channels of monetary policy in the euro area,” he said. After hitting the West’s more vulnerable states, such as Greece, Ireland and Portugal, the crisis has spread to the United States, the world power. It also threatens Italy and Spain. France is currently saved. To stop the contagion, the European and American leaders are trying to convince the financial markets and investors that their priority is to stem the debt.   Source: Le Figaro    

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