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Monday, 26 October 2009

Financial crisis testing EU foundations

Nobel prize winner in economics, Joseph Stiglitz, says the financial crisis is forcing the EU to re-examine its cornerstone policy area – the single market. "The crisis has brought home a couple of fundamental questions for the single market concept of Europe that have not really been adequately discussed," said the star economist at a conference on banking regulation in Brussels. Referring to the banking collapses in Ireland and Iceland late last year, Mr Stiglitz said financial regulation in one country clearly presented problems for depositors in other countries. "And we need to get a grasp on that," he said. But the former World Bank economist, turned critic of its sister organisation the International Monetary Fund, questioned whether Europe was now dealing with such economies correctly. "The current solution which is to put undue burdens on those particular countries that followed the model of deregulation is one that we might want to question," he said. Since member states pumped billions into banks facing meltdown last year, the European Commission has increasingly said that governments need to stem ballooning budget deficits in order not to saddle future generations with mountains of debt. But member states have shown varying degrees of enthusiasm when it comes to reigning in deficits, with all agreeing a solid economic recovery must be secured first.

Source: EU Observer