Wednesday, November 17, 2010

Mechanism for a Permanent Crisis

I was chuckling a while back about the creation of a Permanent Crisis Mechanism for the Eurozone. Oh, chortled I,  how divine. A Mechanism for Permanent Crisis, how apt. Now of course what the Brandenburg hausfrau was after was a Permanent Mechanism for Crisis.

But maybe I was wrong. Take a look at this interview with Wim Duisenberg back in the heady days of the first anniversary of the Single Currency December 2002. The then President of the European Central Bank had this to say to Duetsche Welle,
D.W:   A central part of the treaty would no doubt be the Stability Pact, the criteria now in place for current euro zone countries. Those criteria are now being discussed in European capitals -- especially the three-percent cap on deficit spending. What do you think about suggestion criteria should be softened, especially in light of Germany's economic troubles?

W.D:   I would be very much against it. The criteria are only just in place. It's natural that there are times when it really bites and causes difficulties for some European countries. Then countries talk about changing it. But I'm one who thinks you should never change the rules in the middle of the game. The fact that some countries are now having difficulty meeting the criteria -- like Germany, France and Italy. It is precisely because of the fact that in the recent past, when everything was going well, they didn't grasp the opportunitiy to better consolidate their public finances. Now, because they haven't done that at that time, they are sitting on their blisters. But that's no reason to change the rules. It's all the more reason to finally do what should have been done long before. Out of the 12 euro zone countries, eight have already reached that goal.
Change a few names and where are we, oh yes right here. So a Mechanism for a Permanent Crisis, yup that about sums it up.

No comments: