Member States' economies need more Europe, Barnier and Rehn tell MEPs

With Ireland facing market tensions, austerity measures, and an EU/IMF bailout, the two European Commissioners most heavily involved with handling financial and debt matters addressed the EP's Economics Committee on Monday night. Both stressed the need for bold steps to ensure tight economic coordination and strong EU-level regulation. "Without rapid and real progress to reach true European economic governance we will spend the rest of this Parliament's legislature discussing recurrent fiscal and sovereign debt crises around the EU", were the opening comments of Olli Rehn, Commissioner for Economic and Monetary Affairs. "The Irish situation shows us that we can only be stronger together.  We have to continue moving ahead with financial regulation" said Michel Barnier, Commissioner for Internal Market and Services.

Gay Mitchell (EPP, IE) said that low interest rates around the EU had led to asset bubbles, notably in Ireland, and that this had to be addressed in any future economic governance model.  He also warned about the social upheavals which could occur as a result of the massive cuts being undertaken and asked all parties to be very careful in their comments as Ireland was in a difficult position but it was handling it well and this needed to be recognised.

Mr Rehn replied that governments had other tools at their disposal to combat asset bubbles and it was therefore not fair to lay the blame at the door of monetary policy alone. Anna Podimata (S&D, EL) asked the Commissioner to shed light on the permanent crisis management mechanism due to be developed to help out countries like Greece and Ireland in the future.  She insisted that Parliament could not be left in the dark about this.

Mr Rehn replied that initially the Commission planned to make its proposals in 2011, giving time for market turmoil to ease.  However, Member States had insisted that a proposal be made in time for the December European Council.  He conceded that the current attitude of some Member States would mean that such a mechanism would at first only be an intergovernmental arrangement.  Private sector participation could be envisioned in various ways but this would not apply to any debt contracted up to 2013.

Mr Rehn made a clear link between the situation of the last few days and the need for swift introduction of a model which would effectively ensure fiscal discipline among the Member States. Sylvie Goulard (ALDE, FR) expressed distrust of Member States' willingness to make serious changes to the rules and sanctions governing prudent budgets.  "Why should we trust the Council at all?  In the last ten years they have failed to live up to the goals they themselves set." Sven Giegold (Greens/EFA, DE) questioned how far the Commission wished to go in dealing with countries running a surplus.  "We are maybe talking about dealing with surplus countries but will it only be the deficit countries which will receive sanctions?" he asked.

Corien Wortmann-Kool (EPP, NL) proposed that the "European semester", the procedure for vetting of national budgets by the EU, should be included in the economic governance rules since this was currently only a simple agreement between Member States and might prove not to be enough in times of stress.

News source: EU Press Room link: article

Bulgaria urged to keep faith with Euro

Economists say the country will benefit in the long term from joining the single currency, whatever the current worries over the troubles in Ireland and Greece. Leading economists in Bulgaria say the ongoing crisis in the country - and in the euro-zone - should not dissuade Sofia from aiming to enter the single currency, a move they believe will ultimately benefit the economy. Fears about the stability of the EU’s single-currency zone are growing, centered on the worsening climate in hugely indebted Ireland and Greece. But Bulgarian economists are convinced that the euro-zone will recover and prosper in the long term. "Twenty years after it adopts the euro, Bulgaria’s GDP will be 15 to 20 per cent higher it is than today, by attracting more investment and more intensive trade," Georgi Ganev, an economist with the Centre for Liberal Strategies in Sofia, said.

Ganev said he was convinced that the current problems in the euro-zone will be over long before Bulgaria joins the single currency, which will be in several years' time at the earliest.

Lachezar Bogdanov, another economist, also sees euro-zone membership as the best future option. As the national currency, the lev, is already pegged to the euro, it remains highly vulnerable to problems afflicting the euro-zone anyway, he noted.

"It would be better to be part of the euro-zone and enjoy some of its benefits and take part in the decision-making process," he told Balkan Insight. On Wednesday, the Finance Minister, Simeon Dyankov, told Reuters that the country was determined to apply for ERM II, a so-called "waiting room" for the euro-zone, by as soon as the second half of 2011, when the government plans to meet the EU’s requirement to bring budget deficits under 3 per cent of GDP.

Bulgaria's economy is still struggling to find its way out of financial crisis. In a faint sign of recovery, for the first time in 18 months, the economy grew by 0.2 per cent for the third quarter of this year, compared to the same period in 2009. Earlier this year, Bulgaria, which joined the EU in 2007, was forced to abandon plans to apply for ERM II after it was revealed that it had hidden a deficit of over 3 per cent of GDP for the previous year. The government expects to cut the 2011 deficit to 2.5 per cent and hopes the economy will expand by 3.6 per cent that year. Some economists dismiss these plans as too optimistic.

News source: BalkanInsight link: article