Category Archives: A Few Euros More

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Hungary Given Euro Warning

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Hungary risks missing its 2010 target for adopting the euro unless its government reduces the budget deficit and improves policy co-ordination with the central. This at least is the view of the OECD as expressed in its annual report on Hungary out today. According to the OECD:

“the key conclusion is that further reductions in the general government deficit have to come about through spending cuts because of the already high level of taxation. Failure to reach deficit targets have damaged credibility in the recent past and the Chapter discusses ways of providing more realistic budget targets, more transparent fiscal planning, better assessment of progress over the budget year and improved estimation of outcomes.”

I can think of two pertinent questions to put to the authors of the report: will the euro still be around by the time we get to 2010 (in its present form, I doubt it), and if it is, are they sure that it’s a good idea (looking at what has happened eg to Portugal, Greece and Italy) for Hungary to join.

Portugal Given Three Years

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Portugal has been given three years (till the end of 2008) to resolve its excess deficit situation. Portugal, like Italy only with less press attention, is in the midst of a serious economic slowdown. The decision to give Portugal slightly more time may be the result of a number of factors: it may be that they are perceived to be doing more to correct the situation than the Italian government is, the accumulated deficit in Portugal (68% GDP) is much less than the Italian one (106% GDP), and again, being a little less strict with Portugal counters the ‘you only chase small countries’ argument.

“We are proposing giving the Portuguese government three years to correct its deficit,” Amelia Torres, a spokeswoman for EU monetary affairs commissioner Joaquin Almunia, told reporters on Wednesday.

As a member of the 12-nation eurozone, Portugal is bound to hold its annual public deficit to under three percent of output under terms of the 1997 Stability and Growth Pact.

EU Enthusiasm Study

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According to a new study released today by the commission, the EU’s image amongst its citizens is deteriorating and confidence in EU institutions is decreasing:

The EU’s image is worst amongst British (28%), Finnish (30%) and Austrian (30%) citizens but best amongst the Irish (68%), Italians (63%) and Luxembourgers (58%).

Support for the thorny issue of further enlargement lies at 50% in the EU – a slight decrease since 2004 (53%) – but the figures show a large discrepancy between old and new member states.

Forty-eight percent of EU citizens from old member states support Croatia’s membership of the bloc with the number reaching 72% amongst the new member states.

Croatia is followed by acceding countries Bulgaria (46% support among old member states and 70% amongst the ten new members) and Romania (43%, and 58% respectively).

Turkey has gathered the least support particularly amongst the old member states (32%) and picking up 48% support from new member state citizens.

Garzon Gets His Man

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One day it might be worth writing a post on the life and times of Judge Balthasar Garzon. Today we might just note that he finally has ‘his man’: the US have just agreed to hand-over Lahcen Ikassrien to Spanish authorities. Ikassrien is being held in Guantanamo, but it is important to note that Garzon wants to interview him, not so much about the Madrid bombings, as about the Spanish end of the 11 September operation.

Economy and Elections in Italy

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Of course the accidental is important in history. The latest example would be how electoralist needs are going to impinge on Italy’s attempts to turn its economic crisis round. A year, at least, may well be lost on false promises and inaction. And as if that weren’t enough, the trifecta may be delivered by ‘terrorist-attack psychosis‘.

Italy aims to reduce its deficit to less than 3 per cent of gross domestic product by the end of 2007 ? a target described by Silvio Berlusconi, prime minister, as ?manageable? and which is in line with commitments given this week to the European Union.

However, Mr Berlusconi?s six-party coalition, trailing behind the centre-left opposition in the opinion polls, is planning a relatively mild 2006 budget to save itself from electoral defeat.

Italy?s economy fell into recession between October 2004 and last March and is plagued by low productivity growth, high unit labour costs, falling international competitiveness and an enormous public debt.

Italy’s Inflation Dropping

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Despite warnings from Otmar Issing that “The outlook for price developments has got decidedly gloomier since June”, the situation is far from uniform and far from clear. Yesterday Italy’s national statistical office, ISTAT, announced that annual inflation dropped in June to 1.8%, from 1.9% in May. This was Italy’s lowest annual reading since 1999. Is deflation starting to raise its ugly head? It is too soon to know, but the Italian economy is certainly in its deepest crisis in a generation, and nothing is excluded. Brad Delong posted yesterday about ‘Dials Moving into the Red Zone‘, right now Italy has no shortage of these.