By: Dr. Mike Campbell

The beauty of statistics is that they are amenable to a range of interpretations and emphasis. The headlines today are that the UK and the Czech Republic have refused to sign up to a pact aimed at greater fiscal unity; a bad thing. If you turn the matter on its head, nearly 93% of the sovereign states which make up the EU have signed a pact designed to promote confidence in the single European currency and ward of future financial crises within the block. In the case of the two dissenting nations, domestic factors weighed heavier than any sense of continental solidarity, but it doesn’t seem likely that either will actively obstruct the new agreement beyond their refusal to sign up to it.

The fiscal pact was born of the European sovereign debt firestorm when “leaders” had to be seen to be doing something in order to calm the markets and give investors some reason to stop hiking the cost of sovereign borrowing which, at the time, threatened to propel Spain and Italy further into the mire. The pact aims to prevent excessive sovereign debts from accruing in future by ensuring much closer co-ordination of EU budget policy. It foresees a role for the European Court of Justice to ensure compliance amongst the signatories and grants the power to impose fines on wayward nations. The European Commission is to be given a stronger role in scrutinising national budgets.

Echoing a trope from the IMF, EU leaders asserted their belief that austerity measures alone would not be enough to resolve present difficulties, boost growth and employment within the bloc. The joint statement noted: "We have to modernise our economies and strengthen our competitiveness to secure sustainable growth”.
This may come in the form of moves to develop the single European market; a harmonised EU patent system; promotion of national legislation to create a single market for energy and service; and better targeting of financial support towards small to medium enterprises (SMEs).