Alex Bobrov
Not so long ago S&P downgraded the sovereign ratings of 9 eurozone countries at a time, thus making a “micro collapse” of Europe and shocking financial markets. Everyone thought the end of the eurozone was near. Someone said this would be the best option as only a recession can give those debt-ridden economies a free hand to keep spending after the creation of a “budget union”.
The “budget union” idea was introduced by Angela Merkel and Nicolas Sarkozy during December’s EU summit. The union implied signing an agreement in order to establish tough control over the ratio between a country’s budget spending and public debt.
The UK blocked the idea. Germany and France, on the contrary, want to sign the agreement as soon as possible. Nicolas Sarkozy is trying to cant an any chance to improve the situation in advance of presidential elections in France. Last week EU leaders managed to agree on almost all the issues. The document is expected to be considered by EU finance ministers in late January. Despite that, most countries may have difficulties ratifying it. However, 9 countries will be enough for the budget union to take effect.
The agreement will allow a member to exceed the 3% budget deficit limit only if there is an economic slowdown. In any other case violations will be severely punished.
It necessary to say that until now many countries should have been punished for violating the agreements signed 10 years ago because such decisions should be approved unanimously. Yet, the first violator was… Germany, the eurozone’s biggest economy.
It is said that from now on everything will change. If the Euro Commission finds violations, it will propose sanctions.
Over the last few weeks the 6E futures has managed to recover from its mid-term downtrend. Thus reaching 1.3105
Alex Bobrov
