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EUROPEAN UNION

France begins debate on EU austerity treaty

The French parliament Tuesday opened a difficult debate on an EU fiscal pact that is key to efforts to overcome the eurozone debt crisis but which critics slam as austerity forced by Brussels.

France begins debate on EU austerity treaty
Photo: Elliott Brown

The National Assembly debate comes after tens of thousands of left-wing protesters marched through Paris on Sunday denouncing EU-imposed belt-tightening, although they insisted they were not criticising the government of Socialist President Francois Hollande.

Prime Minister Jean-Marc Ayrault set the tone, saying France would not be sacrificing its "sovereignty" by ratifying the text.

"The treaty itself imposes no constraints on public spending," he said. "It does not specify how it should be distributed. It does not dictate the methods one has to take to balance public finances.

"Fiscal sovereignty will remain with parliament," he said.

Hollande's cabinet has already backed the pact, which includes a so-called golden rule requiring countries with high debt to keep their structural deficits below 0.5% of gross domestic product.

Ayrault said France's Constitutional Council had "already ruled on this matter and no 'golden rule' will be enshrined in our basic law," he said.

Hollande has acknowledged that the going will be tough, saying that "it is true that the situation is difficult".

Ayrault earlier voiced hope that the measure would be "massively adopted" by parliament, adding "the stronger the vote, the stronger will be France's voice and the more we can continue to work towards the reorientation of Europe."

Many on the French left — including within the Socialists and their Green Party allies — have said they will vote against the measure but, with right-wing deputies backing the pact, it is expected to be approved.

On Friday, Hollande's government unveiled a 2013 budget aimed at plugging the €37 billion ($47 billion) hole in France's public finances through tax increases and spending cuts.

Ayrault had earlier also taken pains to stress that Hollande had not given in to Germany, the European Union's main paymaster, by implementing austerity policies.

In line with a pact agreed by eurozone leaders earlier this year, France is committed to reducing the size of its deficit from around 4.5% of GDP this year to 3% in 2013 and to balance the budget by 2017.

The issue is divisive. Far-left leader Jean-Luc Melenchon — who led Sunday's protest in Paris — has warned of "collapse" if spiraling unemployment, now over three million, continues to rise, and called for a referendum.

On Tuesday he said the "government is unmasked" adding that "contrary to what Ayrault said … this is universal austerity" for Europe.

"The Greek, Portuguese and Spanish crises will now be on the agenda in France."

Far-right leader Marine Le Pen of the National Front has also urged a vote be held to "determine our destiny as a sovereign nation".

Signed in March, the pact must be approved by 12 of 17 eurozone members to take effect at the start of next year.

Nine eurozone states have ratified the pact so far.

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EUROPEAN UNION

The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.

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