Asterix Economics

There is no doubt that the EU Budget debate will warm up considerably this week. Unfortunately, as Le Monde suggests it is a case of “Le budget europ?en entre rabais britannique et subventions agricoles” (The EU budget: between the British rebate and the agricultural subsidies). Now it does occur to me that there is another dimension here:

Generations of French children have grown up on the “Asterix” comic books and the myth of the leisurely British who were conquered by Rome because among their shortcomings was a horror of working on weekends. Today, instead of poking fun at their island neighbor, some in France are wondering whether they can learn from it.”

Now *a* generation of French children grew up on this because there was a time when it bore some relation to reality: let’s say in the 60’s and 70’s. But things have changed. Today, according to French Socialist politician Henri Emmanuelli:

You can’t speak about Great Britain without specifying that to earn a living, people there have to have two or three jobs….Even better than that would be slavery with a bowl of rice as recompense. That way there would be no unemployment at all.”

There is just one snag attached to all this fun-poking at the expense of the Brits, and it is called the rebate. If things in the UK are going so badly, then how come they are considered to be so rich they can afford to pay proportionally more? There appears to be an inconsistency here. Isn’t someone about to find themselves hoisted on their own petard?

‘Euro Overvalued’

The euro is apparently overvalued. Actually I happen to agree, but today this opion comes to us from a most surprising person: Luxembourg Prime Minister Jean-Claude Juncker, at this point in time President of the European Union. Now I am surprised by this, since he is neither Economics commisioner, nor spokesperson for the ECB, so I am not clear why it is he feels himself compelled to express an opinion.

Really this just highlights the fact that the institutional labyrinth we have created is such that not even those who administer it have sufficient clarity about who is responsible for what. In theory his press conference was about the forthcoming budget negotiations, but judging by what he said, I’m not clear he got round to reading that memo from Barroso about maintaining a sense of calm.

Luxembourg Prime Minister Jean-Claude Juncker, who holds the European Union presidency, warned on Friday that failure to agree on a new long-term EU budget this month would turn a political problem into a full-blown crisis.

Juncker, who also chairs euro zone finance ministers, said the single currency shared by 12 EU countries had been weakened by the “No” votes to the European constitution in France and the Netherlands but was still overvalued compared to the dollar.

“A failure on the financial perspective (budget) would turn the big European difficulties (after the referendums) into a big European crisis,” he told a news conference.

“As a result of the referendums, the euro is weakened. What helps the economy for the moment could in the long term become a burden,” he said, adding: “I think the euro is overvalued in relation to the dollar.”

He also informed the press that he would resign as PM if, as expected, the Luxembourg referendum voted ‘no’ on July 10. Anybody seen an actual Luxembourg poll recently?

It’s Deficit Time Again

There’s a fair amount of talk again this week about the various government deficits and what to do with them. Earlier in the week the FT had a piece about the current state of play with the US deficit whilst the Economist is busy musing one more time over the ongoing saga of the EU growth and stability pact.

These two situations appear, on the surface, to be somewhat similar, but in reality it may be more interesting to consider how they differ.
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The Dutch Auction

Following points made by both Frans and Elliott in the comments sections, the Netherlands may well in fact breach the 3% growth and stability pact limit next year. I bet Zalm is blogging away more furiously than ever. But who will be the object of his wrath this time?
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Fiscal Tickery

Thanks David for the link. I haven’t commented on this because like Dutch finance minister Zalm (who I imagine working away weblogging into the early hours under a dim light provided only by his mobile phone) I am tired. I can’t help feeling that everything that needs to be said has already been said, and many times over. Now all we can reasonably do is wait and see the consequences.
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Off the Hook Again

Now since nothing in life ever comes entirely free, a post to balance my last one (as we say in Spain: one hot one and one cold one). The French are to be given an extra year to get their fiscal act together. This is more a sign of impotence than a seal of approval. In the end I agree with this approach, there is really nothing – except ridicule – to be gained from imposing a symobolic fine. But the point is that this should not be necessary. Everything here seems to be calculated. But still Austria, the Netherlands and Finland don’t seem too happy. So how fine is the calculation? How often can you take advantage of the impotence of the other before a limit is reached? I have no answer to this, but I know the answer is out there somewhere. I guess we’d better all just hope the EU Commission growth provisions are fulfilled, and that we aren’t going to see an even worse re-run of this next year.
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