Days after it has become fashionable for national governments to launch reflationary packages, the EU is drawing up a list of recommended ways of doing it. This may include the ever popular cutting taxes, and the preferred continental route of increasing spending. I wonder how much high cost brain power it has taken to deliver this show stopper?
More significantly, have you noticed how the EU’s main economic policies have been suspended now there is a crisis? The Competition policy clearly no longer applies to banks, which are able to merge at the drop of a hat with no investigation. The state aids policy has been abandoned for banks, and maybe soon for autos as well. Governments can put any amount of cash they like into banks without a thought for the EU economic policeman or the competitors. Now we also learn that budget discipline has been abandoned. Apparently member states of the EU and of the Euro can now borrow more than 3% of GDP with no new limit.
I do not lose any sleep over the abandonment of policies and powers by the EU, but it just goes to show that the rules of the EU do not apply if France and Germany come to find them inconvenient. Northern Rock was not allowed to trade for new business, we were told, owing to EU rules. That was before big continental banks got into public difficulties. The banks that came after continental problems are allowed state rescue without it affecting their ability to offer new business.