Tag: Sovereign Debt Crisis

Via Vox,eu, here is a link to a translation of an open letter objecting to the EFSF that has been signed by 189 German economists. Rather than making the current mechanism permanent, they prefer the idea of setting up an insolvency scheme for EU states combined with EU funding for states that enter this scheme.

The economists may be presuming that the proposed permanent European Stability Mechanism is intended as a direct follow-on from the EFSF. However, it has been my understanding for some time (i.e. at least since Mrs. Merkel’s comments on burden-sharing last Autumn and the Deauville declaration) that the ESM could well be a vehicle that facilitates sovereign defaults and then provides conditional funding. So the position of the economists may not be far off what the German government is looking for.

Here‘s the text of the agreement on budgetary policies put together by the EU finance ministers yesterday. It seems pretty weak, with little by way of new concrete initiatives. It’s full of aspirations to reduce deficits. The new element that might have been expected in relation to an increased role for the European Commission is restricted to the following statement:

Ministers are committed to fully and strictly implement the surveillance framework defined by the SGP and to contribute actively to the Task Force set up by the President of the European Council, which will consider ways to strengthen the fiscal surveillance framework as well as the surveillance of competitiveness developments in the euro area.

A Task Force that’s going to “consider” things doesn’t sound like much to get excited about.

Here‘s the statement tasking the European Commission with running the €440 billion Special Purpose Vehicle. (You have to love how there’s a Special Purpose Vehicle at the scene of every economic disaster these days.)