13 June 2003

EZA 539 Euro-Politics

EU Convention draft constitution signals new will for deepening, underpinning euro, area dynamics
The European Convention's draft for a new European Union constitution at its official conclusion today signals that a new phase of integration is about to begin. Flawed though the outcome is, it demonstrates an aggregate political will for 'deepening' that will enhance the European single currency's long-term status and therefore external value in global FX markets. The draft will be presented to the EU Council at the Thessaloniki Summit on June 20/21 now constituting the first Intergovernmental Conference. The eventual constitution will be as historically significant as the Treaty of Rome in 1957, facilitating expansion of the current EU 15 to the 12 accession candidates. This will boost the potential euro area to a population of 481m people and its combined GDP to about the same as the US, some $9.5tr. The Convention proposal includes recognition of the need for 'variable speeds' on various issues, enhanced qualified majority voting and some greater powers for the European Commission. This implies faster integration of euro capital markets and increased internal national competition bringing quicker economic liberalisation.

SummaryAsset Conclusions: A substantive new EU constitution addressing decisionmaking needs, variable speed, QMV, will underpin the euro and its assets

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© Graham Bishop