Eurozone Update

Posted on December 6, 2011


As the US fear of a European collapse draws to an end marked by the best week on Wall Street since the recession, American investors believe that the certain threat to American banks and the US economy is over. Unfortunately, there is still work to be done on the European Front. Recently Angela Merkel, Nicholas Sarkozy and other leaders of the European Union have begun developing plans to encourage sustainability within the European Union such as ensuring annual dept is no greater than 3 percent of a nations gdp. The first of these rules has always been present yet the European Union lacked enforcement ignoring the indiscretions of Greece, Ireland, and other countries with solvency issues. The question of enforcement has been a popular target in the British Parliamentary Debate Circuit, do other countries in the Eurozone have the right to analyze and reject a sovereign nations budget? The answer to this question appears to be yes from a press conference with Sarkozy and Merkel today. The pair suggested a sustainability plan to Brussels that would need to be signed by the 17 EuroZone countries as well as the other 27 members of the European Union not using the Euro. The plan will force sanctions and trade penalties on countries that propose a budget violating the 3 percent rule. I believe that this is a good plan, but there are some issues such as national autonomy. It is good that countries should have the right to decide their own budget, but should they be taxed if they are actively decreasing their budget? In 2011 Slovenia proposed that the 2011 deficit would be reduced to 4.7 percent gdp which is an improvement from 5.8 percent in 2008. None the less an economically successful country such as Slovenia would be subject to this tax, only harming future attempts to attack increasing deficits, and continue needed investments in their country. These punishments, taxes, and sanctions should be conditional upon a decrease in debt by the end of the year since this is the overall goal. This would give each country the ability to create their own budget without fear of taxes and sanctions while ensuring that decreasing deficits is a priority.