Euro pact is dead

As predicted here last week (see 17th January, The pact is dead, long live the pact) - a compromise has been found to accomodate Chancellor Schroeder´s wish to abandon the Stability Pact (designed to strengthen the euro and to protect it from political interference).

The new European Commissioner responsible, Joaquin Alumnia, has caved in without offering even token resistance to Schroeder´s requests. The reason isn´t far to seek - the new Commission is seeking a huge increase in its budget. To achieve this, they will be dependent on German money.

Within 10 years, the euro has duly become what the Chancellor Kohl´s German government of 1996 most feared: the hapless plaything of European politicians, at the mercy of short-term and shifting circumstances . In the short-term, Schroeder has been let off the hook. In the long-term, as Kohl knew, this will do nobody any good. The Pact isn´t worth the paper it was written on, whilst the euro, whose strength it was to guarantee, stands revealed as a paper tiger.