Investment Bank Slams Euro Rules
Top investment bank Morgan Stanley has issued a scathing attack on the Stability and Growth Pact, the rules underpinning the euro.
Top investment bank Morgan Stanley's latest statement on the euro-zone economy said, "Europe's fiscal framework is in shambles." "Both the public debate between central bankers and politicians over the reform of the Stability and Growth Pact and the unveiling of the true extent of Greece's fiscal deficits serve to underscore that Euroland's fiscal framework is in serious disarray," wrote Morgan Stanley European equity analyst Joachim Fels. He added that all of this again highlights the fact that there is no credible fiscal policy framework in place to prevent countries from running excessive deficits in the Economic and Monetary Union (EMU). Some central banks, including Germany's Bundesbank, rushed to criticize the European Commission's proposal to reform the Stability Pact when they were unveiled. The European Central Bank (ECB) has also stressed that the treaty should remain untouched but that the implementation of the rules could be improved. The commission proposed in September to allow more time for countries whose deficits break the three percent ceiling of gross domestic product to whip the debt back into shape