Monday, November 1, 2010

Preventing another Greece

At the end of last week, the EU decided to embark on another treaty change. The organization hopes to create a "permanent crisis mechanism" to avoid recurrences of last summer's crisis in Greece. The Economist's Charlemagne blog has a good overview of the diplomacy required to get all the EU countries on board with this idea.

The idea is that profligate countries will be subject to more automatic and harsher sanctions; it will be a new and improved version of the much-maligned stability and growth pact. That agreement foundered in part because key EU member states (including Germany and France, who are now pushing this new mechanism) violated it more or less with impunity.

Given that France's Sarkozy insisted that the sanctions associated with the new mechanism not be fully automatic, there are good reasons to think that it, too, will function only so long as no major EU states run afoul of it. Also of interest: the head of the European Central Bank, Jean-Claude Trichet is not at all a fan of the new idea.

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