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Uncertainty ahead for crisis-ridden Europe
Publication Date : 02-09-2012
All eyes are on Europe to monitor the situation in the next couple of weeks because they will determine the financial situation in the crisis-hit continent. The European Central Bank will discuss a new bond-buying plan on September 6, which has been opposed by the German Bundesbank.
A week after that, the German Constitutional Court will decide whether the European Stability Mechanism (ESM) - Europe's permanent emergency fund - complies with Germany's constitution.
The two events will determine the finances of the euro-zone states. It is hard to predict the outcome as European decision-makers still have different views on how to deal with the debt crisis.
The evolving situations reflect the severity of the euro-zone economic problems and the complexity of issues that euro-zone countries have to deal with. The crisis was triggered by the sovereign debt crisis in Greece, where decision-makers were too slow to implement decisive measures to control the situation.
This has led to a series of events that will reach another significant moment in the next few weeks. A string of rescue packages was previously implemented but the problem has not been fixed yet. Some countries such as Germany have criticised the debt-stricken euro-zone nations for having not done enough to implement reforms.
Germany's central bank has questioned the merit of the ECB's new bond-buying plan, after ECB president Mario Draghi wanted to restart the bond-buying programme to support Spain and Italy.
At the same time, the future of the European Stability Mechanism (ESM) depends on the German Constitutional Court's verdict, scheduled for September 12. The court will decide whether the ESM, Europe's permanent emergency fund, complies with Germany's constitution.
If the verdict rules that the ESM does not comply with German law, it could affect the rescue package for the troubled euro-zone countries. At any rate, the event also shows how the judicial branch can influence the process of EU integration.
Non-euro-zone countries would hope that the euro-zone nations would eventually find the best solution to fix their financial problems. After all, European countries play a significant role in global trade with many European companies making their presence felt across the globe.
In Thailand, concerns over the lingering euro-zone crisis has lowered export prospects, and as a consequence the gross domestic product growth. For instance, in Italy alone, the demand for Thai exports in 2012 is 24.16 per cent lower than in the previous year because of the economic woes, according to information from the Thai embassy in Rome.
However, the drastic financial measures would require support from all stakeholders. Voters in Greece and France have previously made their voices heard in general elections that they do not want to accept the strict austerity measures.
Now, it is the turn of the Germans. While the Bundesbank would try to ensure the ECB's price stability mandate, the German court is trying to address the issue of participation of the German parliament in the decision-making process of the EFSF.
EFSF chief executive officer Klaus Regling earlier expressed optimism that the German court would eventually deliver a positive verdict. The developments leading to the verdict more or less reflect the public opinion in German over the issue.
The upcoming events in the new few weeks can have an impact on the momentum of global economic development and the role of the court in future cooperation within the EU.
Let's hope that the euro-zone countries will find solutions that enjoy support from all stakeholders to ensure steady recovery and reforms in the future. In the meanwhile, the developments in the euro zone are a telling example of how different countries with varying interests have tried to engage in discussions to proceed with their agenda.