Thursday

9th Apr 2020

Top investment bank slams 'shambolic' euro rules

Top investment bank Morgan Stanley has issued a scathing attack on the Stability and Growth Pact - the rules underpinning the euro.

The bank's latest note on the euro zone economy says, "Europe's fiscal framework is in shambles".

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Both the public debate between central bankers and politicians over the reform of the Stability and Growth Pact and the unveiling of the true extent of Greece's fiscal deficits serve to underscore that Euroland's fiscal framework is in serious disarray".

Some central Banks, notably Germany's Bundesbank, rushed to criticise the Commission's proposal to reform the Stability Pact when they were unveiled. The European Central Bank (ECB) has also stressed that the Treaty should remain untouched but that the implementation of the rules could be improved.

And last week saw revelations that the state of Greece's budget deficit was far worse than previously thought - described by Morgan Stanley as "a Greek tragedy".

The note concludes, "All of this again highlights the fact that there is no credible fiscal policy framework in place to prevent countries from running excessive deficits in EMU [Economic and Monetary Union]".

The author of the note, European equity analyst Joachim Fels writes, "I stick to my view that the old Pact is dead and buried, and a credible new one is simply not in sight".

The warning comes as the EU's economics and monetary affairs Commissioner, Joaquin Almunia, prepares to flesh out his ideas to reform the Pact.

Mr Almunia will give a speech entitled, "How to strengthen economic governance" at a workshop in Brussels called "EMU after five years".

The Commission proposed in September to allow more time for countries whose deficits break the three percent ceiling of gross domestic product to whip the debt back into shape.

Brussels also suggested taking more into account the individual economic situation of the country concerned.

Brussels joins attack on Greece for false economic figures

Revelations that Greece's economic data for the past three years were false are causing "real worries to the Commission", it was announced today. But there are no plans to question Athens' participation in the euro zone.

Glossary of key euro pact terms

The language surrounding the EU's Stability and Growth Pact can be highly complex for the uninitiated. Click here for an explanation of the key terms.

Brussels unveils 'more intelligent' euro rules

Proposals to reform the EU's beleaguered economic rules were unveiled on Friday in a bid both to restore confidence in the Stability and Growth Pact and end rows between member states.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

News in Brief

  1. IMF: Pandemic crisis will be worse than great depression
  2. German economy minister expects progress on EU deal
  3. Italian PM: EU is at risk if no deal on recovery plan
  4. Belgian region to block EU Green Deal
  5. EU commission launches green finance consultation
  6. EU parliament kitchens to cook for homeless
  7. EU sets aside €15.6bn for virus fight in Africa and beyond
  8. CO2 emissions from EU plunge 60 percent

Coronavirus

ECB promises (almost) whatever it takes

The eurozone's central bank has promised to buy up to €750bn of government and private bonds in new pandemic counter-measures.

Opinion

What does coronavirus 'Black Swan' mean for markets?

Falling demand and prices for oil and raw materials will revive the risk of deflation. The collapse in international trade and long-term rethinking of China's role as the major hub for the production of consumer goods and electronics is inevitable.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. Why Europe must act now, and on a big scale
  2. EU court blocks Poland's bid to 'frighten' judges
  3. Coronavirus sees approval-rating soar for EU leaders
  4. EU science chief who 'quit' had been told to resign
  5. EU delays 'exit strategies' plan, as WHO urges caution
  6. EU stalemate after 16-hour meeting on economic aid
  7. The future of 'Made in China' after coronavirus?
  8. Refugees across Europe help fight the pandemic

Join EUobserver

Support quality EU news

Join us