Sunday 25 February 2018

Europe ramps up surveillance as cracks begin to show in master plan

WELCOME to the era of "relative independence". It was a phrase used by Dutch Finance Minister and Eurogroup chair Jeroen Dijsselbloem (pictured) on Thursday, as he described the path that Ireland and Spain would take to recovery.

But it's an apt way to describe the destiny of every state in the eurozone, whether a bailout country or not.

We may be subjected to enhanced surveillance because we still owe €67bn, but every country will be under extra scrutiny anyway thanks to new Euro rules designed to avoid repeating the mistakes of the past.

And so it should be with a monetary union, and yesterday's exercise was a case in point.

Remember the days when it was just the periphery countries that were the trouble-makers in Europe? The so-called PIGS risked bringing down the single currency through contagion as fears mounted that instability could sweep across borders.

Yesterday's announcement was a reminder that the eurozone's major players are far from perfect, with a startling number of countries singled out for criticism and facing claims that they are at risk of non-compliance with tough new rules designed to bring debt and deficit levels under control.

France, the Netherlands and Slovenia just about made the cut, while Spain, Italy, Luxembourg, Malta and Finland were given slaps across the wrists.

There was also a gentle reminder for eurozone giant Germany – already under pressure over its trade surplus and the need to boost domestic demand – that it had to do more to address structural reforms.

It's the first time that the European Commission has reviewed national budgets before parliaments have passed them. The aim is to dig out any potential problems before they get a chance to rear their heads and threaten the single currency.

It may add weight to arguments from some quarters that Brussels has too much power; unelected officials judging the affairs of sovereign states.

But the exercise simply aims to formalise rules that have already been in place for some time anyway.

National deficits were supposed to have been limited to 3pc of gross domestic product but this was widely breached in recent years.

Closer scrutiny is no bad thing, even in Ireland's case as we leave the bailout.

The crux issue now is how to handle countries that either don't meet the rules or are at threat of it.

Growth in the bloc all but stagnated in the third quarter and inflation is far from the 2pc target laid down by the ECB.

The commission and ECB may hold Ireland up as an example of how austerity works, but the master plan is showing cracks elsewhere.

Irish Independent

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