IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
The Cypriot crisis has enthroned Germany has the leading European country. European economics are likely to be German driven from now on. Thus, fiscal profligacy or faulty business models are considered to have caused the recent crisis and the German cure to this is clear: austerity and structural reforms must be enforced. Cyprus was first on the list.
The weakness of the other EU member-States has allowed Germany to stand above all others. Spain and Italy are in distress and barely able to govern themselves. The United Kingdom is always glancing at the other side of the pond and anyway does not belong to the Eurogroup. And France is non-existent.
As such, the Cypriot crisis has enacted the inability of French President François Hollande to act and set an economic policy line of action. Being against austerity is not enough: solutions must be proposed and none were. Even the Finns weighted more than the French.
It must be remembered that the leading figure of the European Central Bank to find a way out of the Cypriot crisis was Jörg Asmussen, a German member of the bank’s executive board. Furthermore, German taxpayers will again give funds for this new eurozone bailout. It is not surprising then that Berlin is shaping the economic policy of the European Union.