14.09.10: The EU's economic governance: Rewriting the rulebook - 0 views
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The Greek sovereign debt crisis is forcing Europeans to rethink the coordination of their national economic policies, confronting the euro area with its most severe test since its launch eleven years ago.
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In January 2010, Greece was found sitting on debts that are expected to hit 290 billion euro this year. Its budget deficit stood at 12.7% of gross domestic product, more than four times the EU limit.
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Faced with an unprecedented speculative attack on the euro, EU countries were compelled to act decisively in order to calm jittery financial markets. In May, they agreed to establish a rescue mechanism worth €750 billion to protect the euro from collapsing under the weight of accumulated debt (EurActiv 10/05/10). Root causes left unaddressed However, the short-term fire-fighting measured soon proved insufficient to tackle the root causes of the problem as markets started questioning the loose coordination of national policies that underpin the eurozone’s economic governance. Indeed, EU institutions currently only have limited powers on economic policy, an area where unanimity decision-making remains the rule. The EU’s main instruments include reviews and non-binding recommendations by the European Commission, such as the stability and convergence programmes and Broad Economic Policy Guidelines, which are submitted for approval by member states in the EU Council of Minister.