The House of Lords EU Economic and Financial Affairs Committee says that the eurozone 'remains weak and vulnerable' in its report on the euro area crisis out today. The Committee also repeats its warning to the Government that the UK is becoming increasingly isolated, as the euro area knits closer together.
Commenting, Chairman of the EU Sub-Committee on Economic and Financial Affairs, Lord Harrison, said:
"A more integrated eurozone is necessary for the single currency to thrive. Yet the growing role for eurozone institutions leaves the UK in an increasingly isolated position. The UK needs to get a grip: firstly by maintaining effective working relationships between the Bank of England and the ECB; secondly by developing constructive relationships between the Government and the Eurogroup; and finally by working hard to convince the new European Parliament and European Commission of the City of London's value as the leading global financial centre for the whole of the EU. A vibrant, successful City is a unique asset, key not only to the UK's prospects, but also to the future prosperity of the EU."
Commenting on the economic prospects for the eurozone, Lord Harrison added:
"The good news is that the euro area has recovered from the worst of the crisis, but there is no escaping the bad news that worrying symptoms still persist. The recovery is desperately slow and fragile; there are immense economic disparities between Member States; and more worrying still, the key to revival, economic growth, is distinctly anaemic. Creditor Member States, in particular Germany, need to play their part to play in stimulating growth and demand if the single currency is to succeed."
Despite some countries showing signs of recovery, the report finds that "it would be unwise to conclude that the storm has passed." Fundamental weaknesses still exist, such as poor growth, huge differences in prosperity between Member States, "destructively high" levels of unemployment, and growing fears of a deflationary spiral. These weaknesses leave the eurozone extremely vulnerable to future shocks.
Other findings from the report include:
- Economic and Monetary Union must be accompanied by closer fiscal and political union if the single currency is to prosper.
- The European Central Bank should be credited for its handling of the crisis, in particular its President Mario Draghi for his work in rescuing the euro.