More reasons for the financial markets to worry
Five tests of unity that the eurozone will face this week.
In the wake of Sunday’s election in Greece, the unity of the eurozone will come under close scrutiny this week.
The financial markets were already in a state of excitement over the launch of quantitative easing (QE) by the European Central Bank (ECB). They were also alarmed by some of the more combative rhetoric from Syriza, the radical left party that – as expected – emerged as the winner from the Greek election. How much those markets may now take further fright could depend on whether they detect other signs of disunity and contradiction in the eurozone’s leadership. Here are some of the perils that the eurozone must navigate in the coming days:
1. France’s reform programme
François Hollande, the president of France, demanded back in August 2014 that the European Union and the ECB should do more to boost growth and the European Commission should make the eurozone’s budget rules more flexible. Even though Hollande is hardly negotiating from a position of strength and until this month he was haemorrhaging political support, nevertheless he has got what he asked for. A proposal for the EU to establish a €315 billion investment fund was published by the Commission this month and will be put to legislators, Mario Draghi announced his plans for quantitative easing (QE) on Thursday (22 January) and the previous week the Commission announced relaxation of the EU’s budget rules.
So what do the French do in return? Well, members of the French national parliament will today be debating the Loi Macron, Hollande’s flagship plan for economic and social reform. Among other things, it would allow shops to open 12 Sundays a year and tackle the protected positions of pharmacists, court registrars and notaries. The reforms are bitterly opposed by a large faction of Hollande’s socialists and the centre-right, which when in power from 2007-12 proved adept at committing France to reform but not so good at carrying it out. Later today the European Commission will brief finance ministers, meeting in Brussels, on when it plans to reassess the French, Italian and Belgian budgets for conformity with the eurozone’s budget rules. At the end of this week (30 January), Hollande will meet Angela Merkel, the German chancellor, in Strasbourg. That will be a chance to update her on the Loi Macron. The debate in the national parliament is scheduled to conclude on 6 February.
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