In a report to mark the anniversary, Monetary and Economic Affairs Commissioner Joaquin Almunia called Wednesday for the commission to extend its powers to include "adequate wage developments, flexibility and security on labor markets."

He also proposes that the commission, the executive arm of the 27-nation EU, should launch an early warning system to monitor dangers for the eurozone, so countermeasures can be taken in time.

Almunia also wants the commission to take over the role of representing the 15 countries using the euro in international bodies such as the Group of Seven leading industrialized countries and the International Monetary Fund.

"Unfortunately, the euro area's external representation remains fragmented and the coordination among euro-area countries (is) insufficient," Almunia argues.

"The existence of a single monetary and exchange rate policy in the euro area makes it natural and efficient for the euro area to speak with a single voice," his report says.

"This would strengthen the area's international negotiating power," he concludes, suggesting that the looming threats of climate change and Europe's fast-aging population justify the need for more central control of economic strategy.

It would also represent a dramatic increase of the commission's powers over those of the individual member states, despite repeated protestations that the EU does not seek to become a federal super-state.

The EU's various arms have a long history of steady encroachment on the national sovereignty of its member nations. The trade commissioner represents all 27 nations in bodies like the World Trade Organization. The European Court of Justice has become the dominant legal authority. The European Central Bank, which runs the euro currency, now sets monetary policy and interest rates for its members, even though they are often at different stages of the economic cycle.

This means that Spain, currently undergoing a painful contraction of its once-booming housing and construction sectors, cannot emulate the United States and slash interest rates to ease the pain. Only the ECB can do that.

It also means that Italy, which traditionally devalued its old currency to remain competitive in export markets, can no longer do so. As a result, Italy has been condemned to years of near-zero growth, which has led Italian Prime Minister Silvio Berlusconi to seek French support to push the central bank to cut interest rates and take more account of the need for more growth and job creation.

"A very strong euro is hurting Italy's economy. I will discuss intervening with the ECB with Sarkozy," Berlusconi said last week, referring to his hopes of forging a common front against the central bank with France's President Nicolas Sarkozy, and possibly also with Spain. Berlusconi claims that the central bank's policies have kept the euro too strong, squeezing European exporters out of world markets.

But this would run counter to the interests of Germany, the dominant economy in the eurozone, which supports the ECB goal of fighting inflation by keeping interest rates high. The ECB charter requires it to aim for price stability and guarantees its independence from national politicians.

The issue is likely to come to a head at next month's EU summit, the last such meeting before France assumes the rotating presidency of the EU Council on July 1. France's reign will last for six months, during which it sets the EU agenda and chairs all EU meetings.

Sarkozy is expected to seize the opportunity to press the issue of the ECB policies and the export-chilling effect of the strong euro. With growth slowing across Europe as the credit crunch bites and Spain expecting an extra 500,000 job losses this summer, it promises to be a lively summit.

Despite the pledge of ECB independence, there is a mechanism for the politician to impose control. Article 111 of the Nice Treaty gives the EU Council (the body where the heads of government of the member states all meet) power to set a fixed exchange rate for the euro by unanimous vote. They can also exert very strong pressure for a change in the exchange rate by qualified majority vote. This article of the treaty has never yet been invoked, but Berlusconi is expected to try it.

Berlusconi and Sarkozy can count on strong business support. The EU-wide lobby BusinessEurope warned last week "the strong euro is alarming and in particular the speed of its appreciation since the start of 2008 is a key concern for European companies." The April survey by French corporate treasurers was worse than gloomy, and the IMF has cut its eurozone growth forecast three times since October and is predicting 1.4 percent growth for the bloc this year and 1.2 percent next year. The IMF warned in its latest regional report that Europe will suffer 40 percent of the entire $940 billion in global losses stemming from the credit crunch, with losses of $123 billion faced by European banks alone.

Despite the years of lackluster growth in the EU, Almunia is unapologetic, claiming that the 10 years of the euro have been a great success. Fifteen countries now use the euro, though Britain, the second-largest economy in Europe, still uses its pound sterling.

"Overall, European Monetary Union has brought the macroeconomic stability it was hoped to bring -- and more," he claims.

The euro has clearly been established as a strong currency and as a potential rival for the dollar. Although most of the world's central banks tend to hold twice as many dollars as euros and the OPEC countries still price oil in U.S. dollars, more international bonds are now denominated in euros than in dollars.

The euro has had a bumpy ride on world currency markets. When it was formally launched in January 1999, it traded at 1.17 to the dollar, and then declined sharply to 0.84 to the dollar. But since the Iraq war began swelling U.S. budget deficits, the euro has more than recovered and the subprime crisis in U.S. financial markets has seen the euro soar to 1.60 against the dollar in recent weeks, almost twice as high as it was four years ago.

Community
Email This Article
Comment On This Article

Share This Article With Planet Earth

del.icio.us	Digg	Reddit
YahooMyWeb	Google	Facebook

Related Links
Learn about the Superpowers of the 21st Century at SpaceWar.com
Learn about nuclear weapons doctrine and defense at SpaceWar.com