1 of 3 | People take to the streets of Athens and rise up against proposed austerity measures being debated in the Greek Parliament on February 12, 2012. Historic buildings were set on fire during the protests against at bailout to save Greece from bankruptcy. UPI/Giorgos Moutafis |
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Twenty-five European Union members signed a fiscal treaty Friday that is intended to impose Germanic discipline on member states.
The treaty, with the unappealing title of the "Treaty on stability, coordination and governance in the economic and monetary union," makes it mandatory for states that ratify the agreement to pass a balanced-budget law. It also stipulates that members that miss financial targets will be subjected to intense scrutiny by the European Commission and even have restrictions placed on their decision-making powers related to discretionary spending.
Britain and the Czech Republic opted out of the pact.
Emissaries from 25 other countries will be returning home with a treaty that asks their parliaments to approve a measure that would give Brussels the power to make financial decisions on their behalf with their own taxpayers' money.
Washington does the same thing from a different angle. Federal funding allocations are frequently attached to mandates -- transportation funding, for example, made available only if a state passes a seat-belt law.
But the treaty is more closely aligned to Michigan's financial crisis law in which the state assumes the equivalent of a fiscal martial law on counties and municipalities where the finances are declared out of control. An emergency manager with broad, authority over budget decisions is assigned to the district, like it or not.
It's curious just to hold this treaty up against the present financial crisis in Europe. When the economy soured in Europe, there were special cases to be sure. Greece had overly generous benefits, smudged bookkeeping and slack tax-collecting skills. Portugal was simply unprofitable. Spain was stuck with an ill-timed construction boom that crashed, putting the unemployment rate above 20 percent.
Then there's Italy, where the biggest single mistake seems to be a reliance on membership in the eurozone, which came with promises of its own, along with one currency and 17 different sets of labor laws and 17 different tax rates.
Fiscal discipline is laudable, but once it is firmly established, when the seams weaken, they are apt to weaken in more than one member state. Much of the current turmoil in Europe still relates to the housing market bust in the United States. How can Brussels possibly get that under control?
In international markets Friday, the Nikkei 225 index in Japan added 0.72 percent and the Shanghai composite index in China rose 1.43 percent. The Hang Seng index in Hong Kong gained 0.81 percent and the Sensex in India rose 0.3 percent.
The S&P/ASX 200 in Australia rose 0.41 percent.
In midday trading in Europe, the FTSE 100 index in Britain shed 0.11 percent while the DAX 30 in Germany was flat, adding 0.05 percent. The CAC 40 in France gained 0.24 percent and the Stoxx Europe 600 rose 0.20 percent.
