Not by a long shot. They EU leader came, they saw each other, had a nice dinner but they did not conquer anything. One thing that I liked from the whole outcome is the shift to a rules-based fiscal policy, something I proposed for Romania only few days ago.
Before I begin with the document, there was one issue that bothered me at the summit and it was the dinner. When the EURO is hours from falling apart, as we were told again and again, who the hell has time to sit around and chat. That to me showed that the things are gravely exaggerated and that EURO will not disappear yet. I said yet.
Now, back to what was decided. In a nutshell nothing new, but I will point to the most interesting parts from the statement in my view.
“The stability and integrity of the Economic and Monetary Union and of the European Union as a whole require the swift and vigorous implementation of the measures already agreed as well as further qualitative moves towards a genuine “fiscal stability union” in the euro area.” – They do use words like swift and vigourous to show their determination but then they undermine them with the truth that they are still only moving towards a genuine fiscal union. They are not there yet, and I am sure that do not know how to get there. But as I expected they know this is what the market want to here and they will deliver it.
“…we agreed today on a new “fiscal compact” and on significantly stronger coordination of economic policies in areas of common interest.” As you can see they agreed on something called “fiscal compact”. WHAT THE HELL IS A FISCAL COMPACT???? And most importantly how is it going to help me (the taxpayer) and maybe the EURO if that is the optimal solution for the EU.
“This will require a new deal between euro area Member States to be enshrined in common, ambitious rules that translate their strong political commitment into a new legal framework. ” Ahh, here it is, the secret “fiscal compact” is requires a new deal between euro zone members. This is going to be interesting, especially when we see the details of the “fiscal compact”.
“We commit to establishing a new fiscal rule, containing the following elements:
• General government budgets shall be balanced or in surplus; this principle shall be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5% of nominal GDP.” This makes me happy!!! I just proposed a rules based fiscal policy for Romania few days ago (Rules Based Fiscal Policy..). If this is the direction EU is going than my proposal has better chances of being implemented. Furthermore, I am even tougher with my proposal for Romania as I want 0% structural deficit.
“The rules governing the Excessive Deficit Procedure (Article 126 of the TFEU) will be reinforced for euro area Member States.” This is not new, it has always been the case that countries in breach of the 3% deficit will suffer some sort of consequences.
” …euro area and other Member States will consider, and confirm within 10 days, the provision of additional resources for the IMF of up to EUR 200 billion (USD 270 billion), in the form of bilateral loans, to ensure that the IMF has adequate resources to deal with the crisis. We are looking forward to parallel contributions from the international community.” This I do not get and I am sure it will not really work. Where would the money come from? This is the part I do not like and is the one that will get the most press. However, I hope TV “talking heads” will keep asking the question where does this money come from.
All in all, I am disappointing but I was expecting to be. I am however, surprised by the weakness of the measures agreed upon here. I like the fiscal rule as a concept though, I am not sure if it will be approved in the end. Hopefully I can do my part to get it approved in Romania. The last thing, the biggest weakness of this document is that it just offers proposals not real solution. That is because in the current set-up of EU this is the best they can do. But as we know from recent history those proposals have a totally differnt and more diluted form if they ever get to be implmented.
Here is the official statement.