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Another day, another rescue

EU finance ministers are meeting again in Brussels to stem the financial crisis, but chances are little will be achieved.

Last modified: 21 May 2010 11:55
Photo by AFP

It has been like trying to stem a flood in a dam. Every time they plug the leak in one place, the water starts gushing out of another. And now here we are in Brussels on what is another important day for the Euro and the European Union.

This latest emergency meeting of the bloc’s 27 finance ministers is an attempt to show the world markets that Europe and the Eurozone in particular is getting its house in order. But what is agreed here isn’t just important financially – it has political implications for the whole European Union.

The Germans are trying to draw up the post financial crisis rule book. They come here after their parliament will almost certainly approve a multi-billion dollar injection to a Euro fund to help struggling economies. They will then insist that as they have been the template for fiscal stability, the others have to start playing by their rules.

The plan is the European Commission will tighten economic surveillance and enforce budget discipline to build confidence in the Euro and try to ensure there’s no repeat of the Greek debt crisis.

First, there is the idea that national budget plans are submitted for scrutiny by EU experts before they’re put before national parliaments. This worries a few countries worried that this threatens their sovereignty. The Swedish and the British are particularly dissenters on this idea.

Then there is the warning that persistent fiscal sinners, those who regularly run national debts at more than 3 per cent of GDP will face sanctions. First EU funds will be choked off until they get things under control. Then there is the possibility that when EU finance ministers meet, offenders won’t be allowed a vote. That has huge political implications for EU treaties. After a decade of trying to secure agreement on the Lisbon deal which reformed institutions and procedures – no one wants to engage in another round of referenda on further treaty change. The Irish don’t want it and the new UK Government certainly doesn’t want it.

Germany is the economic driver in Europe – but it can’t do anything in Europe without the political support of the French. Both see the future of the eurozone in very different ways. The Germans think there should be much tighter budget discipline, while the French believe there should be much closer economic policy co-operation which will help mutual economic growth. Despite the differences – and there has been indications of real differences between the two – nothing gets done without the two working together. And both know how important it is now to put up a united front to stabilise the currency.

At the end of this meeting – there will be a news conference and the EU finance ministers will hail the deal agreed, congratulate each other on the work done and try to assure the world the Euro has been saved and is stable. It’s something they’ve done over the past few months – but it’s something that world financial markets have not bought into. And are unlikely to do so now.