in the media

EU Plan Must Be Backed Up by Budget Cuts

While the recently announced Eurozone support package suggests the possibility of a new era of fiscal coordination across Europe, it will only succeed if the countries in need of aid undertake far-reaching policy changes.

by Uri Dadush
published by
Bloomberg
 on May 12, 2010

Source: Bloomberg

The recently announced nearly $1 trillion package in support of weak Euro area members is “tremendously important,” said Uri Dadush. It marks “the end of ‘every man for himself’ in the monetary union” and suggests more fiscal coordination across the countries is likely. It also places other vulnerable countries under “very tough, IMF driven conditionality” if they run into trouble.

However, Dadush added, the package has not completely calmed markets, which fear that “these are unsound governments trying to support unsound governments.” In the end, the package will only work if Spain, Portugal, Italy, and Ireland—as well as Greece—undertake very far-reaching changes.

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