Monday, June 4, 2012

Spain Calls for Centralized Control of National Budgets

Spain has called for centralized control of national budgets in the euro zone. Clearly, this is a move toward more fiscal coordination or even control by Brussels. An article in today's NY Times suggests the euro zone is lurching towards a crossroads--either it will move towards more centralization of fiscal policy or the euro will fall apart. There are renewed calls for creation of a Eurobond, which Germany still rejects.  Germany has called for increasing the powers of the European Commission in Brussels.  Ms Merkel's plans are longer term, requiring treaty changes.  Spain doesn't have that much time. Throughout the "Greek crisis" many have noted that the real concern isn't Greece but Spain. The latter is a much larger economy and any bailout at a scale large enough to be effective will be very expensive.

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