Rise of Economic Absolutism: EU demands right to dictate national budgets

November 24, 2011 – BERLIN – The European Union demanded Wednesday sweeping powers to override national budgets and proposed issuing joint Eurozone bonds to help resolve and prevent a repeat of the debt crisis. “Without stronger governance, it will be difficult if not impossible to sustain the common currency,” EU Commission chief Jose Manuel Barroso said of his latest legislative proposals. The head of the executive EU arm, Barroso presented radical plans that would allow him and Economy Commissioner Olli Rehn to decide to intervene in national policymaking. Each said such new powers were a pre-condition for pooling Eurozone government bonds, presented as a future safeguard. Chancellor Angela Merkel immediately repeated Germany’s opposition to joint Eurozone bonds, saying the approach would not work — just as investors shunned an issue of German 10-year bonds, considered the Eurozone gold standard. French President Nicolas Sarkozy voiced the conviction, which he said Merkel shared, that the 17 Eurozone nations must “better integrate and that at the heart of that integration France and Germany must grow closer and be the base of stability in the Eurozone and Europe in general. There is no other choice,” he stressed. Such closer integration would mean no over-reaching national budgets and no “fiscal dumping.” Countries with excessive budget deficits must make efforts to bring them down, he added, addressing a meeting of French mayors in Paris. However the Netherlands, which backs stronger budget policing, meanwhile warned that plans for fiscal convergence also face an “uphill struggle.” Without naming the objectors, Finance Minister Jan Kees De Jager said: “There are those who resist further discipline.” The proposals, which concern only the Eurozone at this stage, must now journey through the EU’s 27 member states and the European Parliament. –Yahoo News 

Portugal cut to junk status: Fitch cuts Portugal’s “rating” to “trash” The financial rating agency cut the “rating” of Portugal at one level, placing it on a level considered “junk”. The prospects continue to be “negative.” Fitch “concluded its review of the fourth quarter of sovereign debt of Portugal. The large budgetary imbalances, the high indebtedness in all sectors and the adverse macroeconomic forecasts mean that the sovereign credit profile is no longer consistent with a rating of high quality investment “, reveals the Agency of information in a note published today. Thus, Fitch decided to put the country’s financial rating “BB +” from “BBB-”. A descent of a level, but that puts the “rating” of Portugal in a level considered “junk”, i.e. speculative investment. – Jornaldenegocios translated

contribution Tim – Luisport