Development and Finance from issue 2010/2

Margit Rácz

The Crisis in the European Union in Early 2010

- Abstract -

JEL G-01

Crisis management at EU level is still conspicuous by its absence. Whether we shall see any progress in this respect in 2010 is difficult to predict as well. The ratification of the Lisbon Treaty could encourage the birth of measures at EU-level because the European Council has a permanent president. The trio presidency of Spain, Belgium and Hungary brings together three Member States for 18 months which are well representative of the diversity that prevails within the EU-27, including the heterogeneous development. Prompted by the crisis, EU countries successively adopted measures that consistently violated the legislation on budget deficits. As the guardian of the acquis communautaire, the Commission was essentially powerless to do anything to stop deficits from growing. Taking an optimistic view we could also assume that in 2010, supported by the re-launch of growth trends, we will see the start of a planned and controlled reduction in deficits. Of course, we cannot rule out the growth being so weak and shaky that governments will not be bold enough to launch the structural reforms required to ensure a sustained reduction in deficits.

Margit Rácz, CSc, research director (Institute for World Economics of the Hungarian Academy of Sciences)

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