Fiscal Union: New treaty – a legal and economic headache
14 December 2011
Only a few days after the December 9 agreement on a new treaty to bind the EU’s economies more closely, “Franco-German hopes” are “under strain … as several European Union leaders warned of difficulties pushing a far-reaching pact through their national parliaments,” writes the Financial Times.
While at least four non-eurozone countries fear that a green-light for the treaty will depend on the “precise wording” of what promises to be a tricky legal text –
… [e]ven inside the 17-member eurozone, cracks emerged, with Irish opposition leaders calling on Enda Kenny, prime minister, to allow a referendum on the new pact – a vote that would almost certainly fail – and pro-EU opposition parties in the Netherlands attacking the minority government of Mark Rutte, prime minister, for his handling of the deal.
With a first draft anticipated before the holiday, Martin Wolf, the finance daily’s chief economic writer, dubs the “stability and growth union” an “instability and stagnation union”. This “orgy of fiscal austerity,” he writes, will lead to -
… long-term structural recessions in vulnerable countries. To put it bluntly, the single currency will come to stand for wage falls, debt deflation and prolonged economic slumps. Can this stand, however big the costs of a break-up?