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Greece forces Europe to confront economic 'united states'

24 January 2010, 05:27 CET
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(BRUSSELS) - There's no such thing as the United States of Europe, but are the continent's national leaders beginning to wonder if there might not have to be to avoid another Greek debt crisis?

When the 27 countries that make up the European Union gather next month to shape common economic planning for the next decade, the strains Athens has placed on its core currency could yet find far-reaching ramifications.

Certainly, allowing Brussels to poke its nose into national statistical reporting -- as is being mooted -- is unlikely to be the last direct consequence of Greek profligacy for EU-wide governance.

While home to half a billion people and with the world's biggest tariff-free market -- bigger than the United States or China -- Europe's economic integration remains unfinished, principally held back by an instinct for political disintegration.

Yet suddenly the risk of wayward, peripheral members of the club toppling the entire house of cards appears very real to those at the heart of the Brussels enterprise, and the talk on February 11 will be of lessons to be learnt fast.

"Let us be clear: in the past, some national politicians have resisted stronger mechanisms of governance" in Brussels, Jose Manuel Barroso, who heads the European Commission, the body that drafts and enforces EU laws, said last week.

"I hope that... all EU (national) governments will now recognise the need for full ownership of Europe 2020 and for a truly coordinated and coherent action in economic policy," he said, referring to a new strategic framework.

With surveillance reach growing and the debate moving into the area of political sanctions being applied by over-arching Brussels bureaucrats, 'Europe' is making a power-grab for the purse-strings of the member states that fund it.

It's not new, but Greece easily represents "a turning-point in the history of monetary union," which was the 1999 creation of the shared euro currency, says Royal Bank of Scotland economist Jacques Cailloux.

"This is an unprecedented situation, testing the system itself," Cailloux underlined in reference to sudden, sharp upward revision of deficit levels by Athens when its new government came in late last year.

"Europe's responses will shape (budgetary) coordination for decades to come," he added.

Barroso's commission will finally be able to implement a new five-year mandate the day before national leaders assemble in Brussels.

Obtaining the right to "audit" member states is "a first step" towards "a much more centralised system of budgetary coordination," explained Cailloux.

Dubious markets are having none of Greece's promises to fill its budgetary black hole itself: indeed, Athens now has to offer more than three times as much as Germany to attract international lending.

The problem, as ever, is one of "the transfer of sovereignty" from national capitals to Brussels, Belgium's Finance Minister Didier Reynders said on Friday.

And yet, the need to come up with a "more efficient organisation" across the bloc means he for one is pushing for "greater integration of our political economies" to reflect that of its monetary pillar, the European Central Bank.

While one high-ranking diplomat expressed agreement with stated Spanish desires to strengthen economic governance, at least across the 16 countries that share the euro, fierce obstacles -- not least London -- remain.

"Because not everyone is on the same page, to begin with we will adopt a new economic strategy (Europe 2020) to replace our Lisbon Strategy -- and that one won't work either," the diplomat said cynically.

"Politically, we are still a very long way off," warned analyst Sylvain Broyer of Natixis.


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