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Euro Treaty Needs Updating, Says Ecb's Bini Smaghi

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http://www.guardian.co.uk/business/feedarticle/9167756

The euro currency treaty needs updating to take account of the financial crisis, European Central Bank (ECB) Executive Board member Lorenzo Bini Smaghi said in an interview on Sunday.

Possible changes to the Maastricht Treaty include lowering the budget deficit limit of 3 percent of gross domestic product (GDP), he told La Stampa daily.

"The public deficit limit established by the Maastricht Treaty, 3 percent of GDP, was calibrated on average economic growth of 3 percent a year. In the outlook for coming years the euro area can reach growth of about half that. So that figure needs to be changed," he said.

"The 3 percent limit gets lowered. The accounts should tend to be balanced."

He added that serious European budget tightening would begin in 2011.

Bini Smaghi said each euro zone country should "internalise" changes on its own.

"Otherwise leaders will have the easy way out of saying, 'We're cutting the budget because Europe is making us', and Europe will become even more unpopular with its citizens."

Asked if the euro was out of danger, he said: "The euro was never in danger. The people who were betting against it are seeing it in their own accounts, they are losing a lot of money."

Bini Smaghi said: "The euro was not and is not the problem. It was the economic policies of some countries. Their behaviour was not in line with participation in the single currency."

He said Germany's economy, the biggest in the euro zone, could grow more by liberalising its services sector than by increasing public spending.

Bini Smaghi said aid to euro zone countries in trouble had not been a burden to Germany.

"But we need to be ready for temporary aid that allows a country in trouble to get on its feet. And in future we must have rules, as much as possible automatic, that allow divergent policies to be blocked.

"That is why the ECB is calling to strengthen the proposals by EU President Herman Van Rampuy to modify the (euro zone) stability pact."

The perpetual growth machine is at work again, we can borrow 3% of GDP providing we are growing at 3% a year.

Borrowing to grow, it's full proof.

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http://imarketnews.com/?q=node/16211

The Eurozone needs a more effective crisis management framework, European Central Bank Executive Board member Lorenzo Bini Smaghi said Friday.

While the responsibility for reforms lies primarily with member states, the European framework does need to be strengthened, Bini Smaghi said during a presentation at the ECB And Its Watchers Conference.

The European Commission's recent reform proposal "is not going far enough," Bini Smaghi warned.

In future crises, he said, we "can't wait another three month before decisions are taken. We have to be able to take decisions very quickly."

He called for a strengthening of surveillance "over budgetary policies and more effective prevention and correction of excessive deficits and debts."

In addition, there needs to be an improvement in the "framework for competitiveness surveillance and the correction of economic imbalances via a traffic light system," he said.

Overall, "we need to strengthen the E of the EMU," Bini Smaghi asserted.

traffic_lights.jpg

Something like this then?

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http://www.guardian.co.uk/business/feedarticle/9167756

The perpetual growth machine is at work again, we can borrow 3% of GDP providing we are growing at 3% a year.

Borrowing to grow, it's full proof.

The logic of this argument would mean s that as GDP contracts in a recession then deficit spending should also contract at the same rate.

Woo Hoo 1930s Depression here we come ?

Cant be long before the men with shiny jack boots who make the trains run on time should be seen all over Europe

I am starting my air raid shelter now.

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The logic of this argument would mean s that as GDP contracts in a recession then deficit spending should also contract at the same rate.

Woo Hoo 1930s Depression here we come ?

Cant be long before the men with shiny jack boots who make the trains run on time should be seen all over Europe

I am starting my air raid shelter now.

Anderson - or the cheaper chinese import variety?

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Sounds like the thin end of the wedge to introduce more powers for the "E union".

If they'd used their current powers more effectively to curtail lax governments exceeding their deficit limits they wouldn't be in the current mess.

But it's given them a "good" excuse to try for more powers and stricter limits.

How often if ever were existing sanctions applied. NEVER?

The Stability and Growth Pact is the cornerstone of budgetary discipline. This Regulation is part of the pact, and its aim is to clarify and speed up the excessive deficit procedure so that it acts as a genuine deterrent. It supplements the 1993 Regulation laying down the procedure to be followed in connection with excessive deficits. Following discussions on the way the Stability and Growth Pact is applied, the Regulation was amended in 2005.

....

....

SUMMARY

The aim of this Regulation is to clarify and speed up the excessive deficit procedure provided for in Article 104 of the Treaty establishing the European Community (EC Treaty). The emergence of excessive deficits must be prevented and rapidly corrected.

The reference value: 3% of GDP

....

....

The Council sets a deadline for corrective action to be taken by the Member State. This corrective action must comply with the Council's recommendations and its sanctions. Upon the expiry of this deadline, the Commission gives the Council its opinion on the corrective measures taken by the Member State concerned. The Commission's opinion is based on the premise that these measures have been fully implemented and that economic developments are in line with forecasts.

In order to examine a participating Member State's adjustment efforts, the Council may ask the Member State to submit reports in accordance with a specific timetable:

* if action by that participating Member State is not being implemented or, in the Council's view, is proving to be inadequate;

* if actual data indicate that an excessive deficit has not been corrected by that participating Member State within the time limits specified in the recommendations.

Sanctions first take the form of a non-interest-bearing deposit with the Community. The amount of this deposit comprises:

* a fixed component equal to 0.2% of GDP;

* a variable component equal to one tenth of the difference between the deficit as a percentage of GDP in the year in which the deficit was deemed to be excessive and the reference value of 3% of GDP.

Each following year, the Council may decide to intensify sanctions by requiring an additional deposit. This will be equal to one tenth of the difference between the deficit as a percentage of GDP in the preceding year and the reference value of 3% of GDP.

Deposits may not exceed the upper limit of 0.5% of GDP per year.

As a rule, a deposit is converted into a fine if, in the Council's opinion, the excessive deficit has not been corrected after two years.

The Council may decide to abrogate some or all of the sanctions, depending on the significance of the progress made by the participating Member State concerned in correcting the excessive deficit.

The Council will abrogate all outstanding sanctions if the decision on the existence of an excessive deficit is repealed. Any fines already imposed will not be reimbursed to the participating Member State concerned.

Both the interest on the deposits lodged with the Commission and the yield from any fines will be distributed among Member States without an excessive deficit, in proportion to their share of the total gross national product (GNP) of the eligible Member States.

Special conditions apply to the United Kingdom because its budgetary year is not a calendar year.

Background

The aim of the Stability and Growth Pact is to prevent excessive budget deficits emerging in the euro zone after the beginning of the third phase of Economic and Monetary Union (EMU), which started on 1 January 1999.

As the Treaty only sets out quantitative criteria for adopting the single currency and does not specify a budgetary policy to be implemented after the introduction of the euro, Member States judged it necessary to adopt the Stability and Growth Pact. It is therefore in keeping with the principles set out in the Treaty and extends its provisions.

The Pact is intended to ensure sound management of public finances in the euro zone in order to prevent a situation arising in which one Member State's lax budgetary policy penalises the other Member States through interest rates and undermines confidence in the economic stability of the euro zone. It is designed to ensure the sustained and lasting convergence of the economies of Member States belonging to the euro zone.

Some cornerstone and they even had the cheek to call it a "Regulation" with a capital R.

Edited by billybong

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"Otherwise leaders will have the easy way out of saying, 'We're cutting the budget because Europe is making us', and Europe will become even more unpopular with its citizens."

Yeah but what about the future years of austerity because of all their laxity. They're hoping people will forget that.

The Germans never forgot their stupid governments getting them into problems.

Edited by billybong

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The logic of this argument would mean s that as GDP contracts in a recession then deficit spending should also contract at the same rate.

Woo Hoo 1930s Depression here we come ?

Cant be long before the men with shiny jack boots who make the trains run on time should be seen all over Europe

I am starting my air raid shelter now.

Its obvious that the germans are running the show. There's absolutely no mention of "effective prevention and correction of excessive surpluses". European monetary policy is being run by and for the benefit of germany (or at least for what germany thinks is to the benefit of germany). They have done by stealth what they tried and failed to do through two world wars.

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Its obvious that the germans are running the show. There's absolutely no mention of "effective prevention and correction of excessive surpluses". European monetary policy is being run by and for the benefit of germany (or at least for what germany thinks is to the benefit of germany). They have done by stealth what they tried and failed to do through two world wars.

Did anyone think there would be another outcome? For those signing up to the Euro it was going to be the German way of doing things.

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Did anyone think there would be another outcome? For those signing up to the Euro it was going to be the German way of doing things.

Pretty good reason to sign up for the Euro then. Sound money and balanced budgets instead of the Ponzi schemes and the ever weaker pound that the criminals in this country foist on us.

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Pretty good reason to sign up for the Euro then. Sound money and balanced budgets instead of the Ponzi schemes and the ever weaker pound that the criminals in this country foist on us.

Providing you actually do that, trouble is none of those joining did.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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