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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

EU Proposes Intrusive Control of Euro Zone Budgets

Posted by WARREN MOSLER on November 23rd, 2011

Another prelude to Germany supporting the ECB funding support that will end the solvency issue falling into place:

EU exec proposes intrusive control of euro zone budgets

By Luke Baker and Jan Strupczewski

November 23 (Reuters) — The Commission, the executive arm of the 27-member European Union, presented a draft regulation which would allow it to review draft budgets of euro zone countries by mid-October and ask for revisions if they were not in line with EU budget rules.

The budget drafts of euro zone countries would have to be based on independent forecasts.

The second regulation would create a legal basis for heavy surveillance of policies of a country either already getting emergency financial aid from the euro zone or facing serious financial instability.

“To return to growth, member states need to raise their game when it comes to implementing their commitments to structural reforms, as well as embrace deeper integration for the euro area,” Commission President Jose Manuel Barroso said.

“The goals driving this package — economic growth, financial stability, budgetary discipline — are linked to each other. We need all of them if we are to move beyond the current emergency towards a Europe in which solidarity is balanced by strengthened responsibility,” Barroso said.

Once the tighter oversight and control of euro zone national fiscal policy is in place, the 17 countries now sharing the euro could jointly borrow from the market through “stability bonds.”

The Commission outlined three main options for such joint debt issuance without making any recommendations on which might be best.

“The Commission makes clear that any move towards introducing stability bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline,” it said in a statement.

18 Responses to “EU Proposes Intrusive Control of Euro Zone Budgets”

  1. SG Says:

    Warren, how quickly do you think they could fashion something…days, weeks, months?

    Reply

    WARREN MOSLER Reply:

    don’t know, but just saying they will and that it will come with ecb support could put the solvency issue behind us

    Reply

    Art Reply:

    @WARREN MOSLER,

    Key question might be how high Bund yields have to go to move German public opinion?

    Reply

    WARREN MOSLER Reply:

    Agreed!
    ;)

  2. Talvez... Says:

    When will this madness stop?

    Reply

    WARREN MOSLER Reply:

    mayan calander says next year?

    Reply

  3. Tom Says:

    Yup Warren, they’re almost there.

    Reply

  4. roger erickson Says:

    ??

    “To return to growth, member states need to raise their game when it comes to implementing [austerity].”

    When they form a truly unified EEU, just call it Oxymoronia?

    (and be sure to get a very cheap logo & seal)

    Reply

    JS Reply:

    @roger erickson,

    No need of verbal tautologies. EU is an oxymoron in itself. For a taste of it, think AU – American Union. With a single currency that could be named the Columbus – making up the Columbus Zone or CZ…

    Reply

  5. jake Says:

    Do the europeans even pretend to have democracies anymore? The euro must be killed before the financial dictatorship becomes any worse.

    Reply

  6. roger erickson Says:

    at least we can all rest easy now;

    “Moody’s won’t lower US credit rating for supercommittee failure”

    http://thehill.com/blogs/on-the-money/budget/195311-moodys-nation-still-aaa-for-now

    turns out tryptophan makes raters [& turkeys] too sleepy to rate?

    Reply

  7. roger erickson Says:

    dang, this just interrupted my nap

    Moody’s warns U.S. not to skimp on deficit cuts
    http://www.reuters.com/article/2011/11/23/usa-moodys-committee-idUSN1E7AM0R020111123

    somebody please stuff something besides the ballot box – send another turkey to Moody’s

    Reply

    Unforgiven Reply:

    @roger erickson,

    Or perhaps just a specific part of the turkey, rather opposite the head. Let’s call it the “Moody’s Cut”!

    Reply

    roger erickson Reply:

    @Unforgiven, great name!

    but that already seems to be a ritual incision required by Harvard before acolytes may assume any Federal office

    can’t faze the hazers; until some economy dies?

    Reply

  8. Tom Hickey Says:

    “The goals driving this package — economic growth, financial stability, budgetary discipline — are linked to each other. We need all of them if we are to move beyond the current emergency towards a Europe in which solidarity is balanced by strengthened responsibility,”

    Translation: expansionary fiscal austerity

    Good luck with that, as David Cameron is learning the hard way.

    Reply

  9. PG Says:

    It is possible that the ECB going into funding support mode would give a window of opportunity to take money out of EZ before austerity will tank the whole thing.

    Reply

  10. Talvez... Says:

    One thing I just found out: the Bundesbank is Germany’s last resort lender.
    I guess that makes them hypocrites.

    Reply

  11. Matt Says:

    Interesting interview with Robert Skidelsky (Keynes’ biographer) at electricpolitics.com

    Reply

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