Angela Merkel and Nicolas Sarkozy may believe they have found a solution to the eurozone debt crisis – but economists are not convinced, Channel 4 News finds.
A Reuters poll of 57 economists found that two thirds (38 of them) did not think the Brussels summit would succeed in its aims of resolving the eurozone crisis – regardless of the political shenanigans around David Cameron’s veto. Economists contacted by Channel 4 News agreed.
Raoul Ruparel, from the pro-market Open Europe think tank, said: “I think in terms of solving the crisis this agreement doesn’t do much.”
Simon Tilford, from the pro-European Centre for European Reform, agreed, telling Channel 4 News: “This week’s summit will do little to solve the fundamentals of this crisis.”
To curb excessive borrowing, the summit agreed a so-called “fiscal compact”, with a new system of automatic sanctions for eurozone countries that run up budget deficits of more than 3 per cent of national output.
Sanctions exist at the moment, as a result of the 1992 Maastricht treaty and 1997 stability and growth pact, but have never been enforced.
But Mr Ruparel told Channel 4 News the new regime would not be effective. He said all that had changed was the way voting took place.
Deflecting on to Cameron is a side issue, a diversionary tactic. Raoul Ruparel, Open Europe
“Sanctions are the key point here and they’re now not any more enforceable than they were before. Previously you needed a qualified majority vote. Now it happens automatically, but you need a qualified majority vote if you want to stop them,” he said.
Mr Ruparel said David Cameron was being unfairly vilified for standing up for British interests.
“Germany has said no to eurobonds and France has said no to the European Court of Justice enforcing the sanctions. How is it that any different to what Cameron is asking for?
“This was supposed to be a summit to tackle the eurozone crisis and ultimately it isn’t the UK’s fault that they’ve failed to do that. Deflecting on to Cameron is a side issue, a diversionary tactic.”
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Mr Tilford, from the pro-European Centre for European Reform, told Channel 4 News the summit should have agreed a fully-fledged fiscal union. Instead, all it had done was tinker.
“This is little different from what the eurozone already had: the stability and growth pact. All it does is require states to keep their budget deficits under 3 per cent. That is not a fiscal union, which would mean a federal budget and revenue-raising powers,” he said.
Due to German concerns, the summit did not adopt a proposal for the European Central Bank (ECB) to be given a bigger role in buying government debt. Two ECB sources told Reuters the ECB would cap its bond-buying programme.
“You will see some further purchases, but not the huge bazooka that some people in the markets and the media are awaiting,” one central banker told Reuters on condition of anonymity.
Mr Tilford said there were “formidable obstacles” to beefing up the ECB, but in the short term it could do more.
Britain has been criticised for vetoing a new treaty for all 27 EU members – although the prime minister told Channel 4 News the country would still have “influence”. The other 26 have signed up, but there are still sticking points to overcome.
Ireland is concerned about the harmonisation of business taxes because it sees its low tax regime as a way of attracting investment from overseas. Irish Europe Minister Lucinda Creighton said there was a 50/50 likelihood that Dublin would have to hold another referendum. In the last decade, Irish voters have twice rejected EU treaties.
Finland and Holland have raised concerns over the new European Stability Mechanism (ESM), a permanent bailout fund for indebted countries.
They also have their doubts over Franco-German proposals that would mean decisions would not have to be taken unanimously – in other words, they would lose their veto if they had objections.