Brussels fudge: it's not Belgium's best-known export, but it was a welcome early Christmas present in Paris and Berlin last week. France and Germany have repeatedly flouted the rules that are meant to keep members of the euro in check but on Tuesday the European Commission caved in to the club's most powerful members, and decided to turn a blind eye for another year.
The commission's ruling, which rubber-stamped a decision by eurozone finance ministers, confirmed that the stability and growth pact, the euro's fiscal rulebook, is in tat-ters. The pact commits euro members to keeping their budget deficits strictly below 3 percent; but by the end of the year Germany will have broken that rule for three years in succession, and so will France.
Greece recently unveiled revised budget figures that showed that its deficits were so big it would never have been allowed to join the euro in the first place if the truth had been revealed: It has broken the 3 percent rule every year since 1997. In Italy, Prime Minister Silvio Berlusconi is determined to cut taxes despite already running a deficit well above the 3 percent threshold.
"The problem with the stability and growth pact is that nobody believes the figures any more," says David Brown, chief European economist at Bear Stearns.
"The history of the last three to four years has been one of fiscal fudge and moving the goalposts," he said.
Meanwhile, in Frankfurt, the European Central Bank (ECB), which has never disguised its fury at governments' lax interpretation of the stability pact, has also had to watch impotently over the last two months as the foreign exchange markets have forced up the price of the euro, at a pace that ECB President Jean-Claude Trichet has called "brutal."
Growth in the 12-member zone slowed to 0.3 percent in the third quarter of this year, after a promising start in the first quarter when it expanded by 0.7 percent. Three years after the eurozone's 300 million consumers began to carry euro notes and coins in their purses and pockets, the fudging of the pact, together with the sickly performance of the euro-economy, renews questions about whether the single currency is working.
As analysts hurriedly revise down their forecasts for growth in the eurozone next year, governments in its 12 capitals are blaming the ECB for failing to cut interest rates and boost growth -- while the ECB has repeatedly called on finance ministers to carry out economic reforms rather than rely on monetary policy to rescue them.
"The whole thing's a stand-off," Brown says. "The ECB's putting pressure on eurozone finance ministers to cut their budgets, and the finance ministers are putting pressure on the ECB to cut rates: You're left with an impasse."
He says the ECB's latest press conference, at which Trichet said the bank had considered raising interest rates, despite the potentially damaging surge in the euro, showed how out of touch the eurozone's central bankers have become.
NO HUMAN ERROR: After the incident, the Coast Guard Administration said it would obtain uncrewed aerial vehicles and vessels to boost its detection capacity Authorities would improve border control to prevent unlawful entry into Taiwan’s waters and safeguard national security, the Mainland Affairs Council (MAC) said yesterday after a Chinese man reached the nation’s coast on an inflatable boat, saying he “defected to freedom.” The man was found on a rubber boat when he was about to set foot on Taiwan at the estuary of Houkeng River (後坑溪) near Taiping Borough (太平) in New Taipei City’s Linkou District (林口), authorities said. The Coast Guard Administration’s (CGA) northern branch said it received a report at 6:30am yesterday morning from the New Taipei City Fire Department about a
IN BEIJING’S FAVOR: A China Coast Guard spokesperson said that the Chinese maritime police would continue to carry out law enforcement activities in waters it claims The Philippines withdrew its coast guard vessel from a South China Sea shoal that has recently been at the center of tensions with Beijing. BRP Teresa Magbanua “was compelled to return to port” from Sabina Shoal (Xianbin Shoal, 仙濱暗沙) due to bad weather, depleted supplies and the need to evacuate personnel requiring medical care, the Philippine Coast Guard (PCG) spokesman Jay Tarriela said yesterday in a post on X. The Philippine vessel “will be in tiptop shape to resume her mission” after it has been resupplied and repaired, Philippine Executive Secretary Lucas Bersamin, who heads the nation’s maritime council, said
REGIONAL STABILITY: Taipei thanked the Biden administration for authorizing its 16th sale of military goods and services to uphold Taiwan’s defense and safety The US Department of State has approved the sale of US$228 million of military goods and services to Taiwan, the US Department of Defense said on Monday. The state department “made a determination approving a possible Foreign Military Sale” to the Taipei Economic and Cultural Representative Office in the US for “return, repair and reshipment of spare parts and related equipment,” the defense department’s Defense Security Cooperation Agency said in a news release. Taiwan had requested the purchase of items and services which include the “return, repair and reshipment of classified and unclassified spare parts for aircraft and related equipment; US Government
More than 500 people on Saturday marched in New York in support of Taiwan’s entry to the UN, significantly more people than previous years. The march, coinciding with the ongoing 79th session of the UN General Assembly, comes close on the heels of growing international discourse regarding the meaning of UN Resolution 2758. Resolution 2758, adopted by the UN General Assembly in 1971, recognizes the People’s Republic of China (PRC) as the “only lawful representative of China.” It resulted in the Republic of China (ROC) losing its seat at the UN to the PRC. Taiwan has since been excluded from