Daily Archives: October 9, 2012

Britain's David Cameron meets EU's Herman Van Rompuy at Downing Street last year.

Aides to Herman Van Rompuy, the European Council president, have circulated an updated draft of conclusions for next week’s EU summit and, according to a copy obtained by Brussels Blog, they have retained controversial proposals for a single eurozone budget and “contracts” between eurozone countries and Brussels on economic reform programmes.

Unlike the previous proposal by Van Rompuy’s staff, which was labeled “guidelines” and intended only to generate discussion, the current text (a copy of which we’ve posted here) comes in formal “draft conclusions” form – a technical yet significant difference, meaning there was widespread support for the ideas in talks with eurozone member states.

As we reported ahead of this week’s Conservative party conference in the UK, the idea of a eurozone budget has even gained support from the British government, which views it as a way for the 17 eurozone countries to increase their spending on a European level even as the UK freezes its commitment to the EU-wide budget for all 27 members.

However, in a tweak of the Van Rompuy language that appears aimed at Britain, the communiqué makes clear that any plans for a eurozone budget – or “fiscal capacity” in eurospeak – would be separate from negotiations over the EU-wide budget, which is known as the multiannual financial framework: Read more

IMF's Blanchard unveils report at Tokyo gathering of finance ministers and central bankers.

[UPDATE] After a meeting of EU finance ministers in Luxembourg, Olli Rehn, the European Commission’s economic chief, said he would read the IMF’s analysis on the way back to Brussels. But he cautioned that while the impact of austerity on growth was important to consider, it was also essential to take into account the “confidence effect” budget consolidation has. He pointed to Belgium, which has gone from market laggard to nearly a safe haven after implementing tough austerity measures earlier this year.

Although the headlines generated by last night’s release of the IMF’s annual World Economic Outlook focused on the downgrading of global growth prospects, for the eurozone crisis the most important item in the 250-page report may just be a three-page box on how austerity measures affect struggling economies.

The box – co-authored by IMF chief economist Olivier Blanchard and staff economist Daniel Leigh – argues in stark language that the IMF as well as other major international institutions, including the European Commission, have consistently underestimated the impact austerity has on growth.

For a eurozone crisis response that has piled harsh austerity medicine on not only bailout countries but “core” members with high debt levels –Italy, France and Belgium, for instance – the IMF finding could shake up the debate on how tough Brussels should continue to be on eurozone debtors. As French economist Jean Pisani-Ferry, director of the influential Brussels think tank Bruegel, tweeted yesterday:

[blackbirdpie url="https://twitter.com/BruegelPisani/status/255520457976061952"] Read more

Greek protesters prepare for Chancellor Angela Merkel's visit this morning in central Athens.

Since coming a surprise second in June’s Greek elections, Syriza, the radical left-wing coalition, can point to at least one (admittedly modest) success in addressing the country’s monstrous unemployment problem: It has found a job for Aphrodite Babassi.

Babassi, a Syriza supporter who appeared in the FT’s pages in May, had been jobless for three years before she took a post in July on the staff of one of the party’s new members of parliament, Afrodite Stapouli, researching science policy.

We bumped into Babassi, 27, at Syntagma Square on Monday night, where – as she prepared to protest against the pending visit of German Chancellor Angela Merkel – she recalled the joy of receiving her first pay check. Read more