EU finance ministers, meeting in Luxembourg today, will have much to discuss. The rejection of the EU constitution by two of the founder-members of the union might not, on the surface, affect economic policy but the Minister for Finance, Brian Cowen, and his colleagues will recognise that discontent over economic stagnation in France and the Netherlands played a significant part in both referendum results.
Discontent is to be found, in varying degrees, throughout the union. Voters in Italy and Germany have made it clear that they will remove their governments at the first opportunity unless economic prospects improve. The response of some politicians, not surprisingly, is to blame the European Central Bank (ECB) and even the euro.
The Italian prime minister, Silvio Berlusconi, has said Italy's recession is due to the euro's high exchange rate against the US dollar and to the policies of the ECB. Mr Berlusconi is fooling nobody. Italy has tumbled into recession because its labour market is too rigid and its costs are too high. Excessive government spending and high taxes don't help either. But scape-goating is a popular distraction. A member of Mr Berlusconi's coalition, the welfare minister Roberto Maroni, has declared that Italy would be better off leaving the euro zone and returning to the lira.
European governments need to keep a clear focus on reality if the economic malaise is to be tackled. But they must recognise also that the solutions are more likely to be found at national rather than European level. The ECB was criticised last week for not reducing interest rates. But they stand at only 2 per cent which is a long way from usury. The euro's high value against the dollar is attributable to US debt levels and is not symptomatic of a flaw in the single currency's structures.
Mr Cowen may be the envy of other ministers today. Ireland's growth rate this year is expected to reach 5.5 per cent, far ahead of the euro zone average. Although the live register of unemployment climbed in May with an additional 2,600 signing on bringing it to a total of 156,800, the overall unemployment rate is a modest 4.3 per cent. The Irish National Organisation for the Unemployed claims that the rate for under 25s is above 10 per cent. Yet, a labour market survey has found that 40 per cent of small companies cite recruitment difficulties as a barrier to expansion. Clearly, the supports and infrastructure needed to assist young people into the labour force need to be improved. This is an issue which the Government must resolve without delay.