Report by Julia Pastor, in Madrid| The news of the day in all European media is the Franco-German proposal to create a hard core Europe, which would consist only of the countries able to maintain fiscal discipline. The new euro zone would consist of nine countries, including Spain. The response of the European Commission, through its president Durao Barroso, was clear:
“A divided union with an integrated core and disconnected periphery will not work in the long term.”
This greater political integration would mean a greater economic, fiscal and tax integration, and it would not involve the exit of any EU country. The implementation of this initiative would require the modification of the euro zone founding treaty, which could be discussed at the next summit of Heads of State and Government on December 9th.
According to analysts at Banco Santander, a French government official qualified these rumors as ‘ridiculous’ and said that there is no intention of reducing the euro zone. According to the Spanish bank,
“the reduction of the euro zone is a highly unlikely and unfeasible scenario.”
At Santander, they remind investors that this is not the first time that discussions of this type are filtered, although in any case, the timing is very unfortunate for the markets.
Link analysts coincide with this opinion and describe the proposal as
“lacking detail and impractical if you want to keep the single currency.”
For the Bankinter experts,
“even though it is a proposal that is not going to materialise immediately, it clearly reveals that the Franco-German axis does not want to see itself carried away by the Italian crisis, something which raises additional questions.”
José Luis Campuzano, chief strategist at Citibank in Spain, believes that, despite everything, the fact that Europe is indeed functioning is going unnoticed.
“It is true that risk premiums have skyrocketed, but for the moment there is no other disciplinary factor in the euro zone for those countries that do not carry out the necessary adjustments or do not keep their promises. This will come in time through reforms in the Lisbon Treaty and greater economic governance. For now it is the market that is setting the speed.”