Concerning the legal environment of business, the lawyers who teach as full-time instructors in American business schools affirm that managers would rather have a challenging environment that they know than one that is characterized by headlines such as, “Legal Uncertainty Imperils EU Agreement.” At the E.U.’s parliament, which represents the E.U.’s citizens, the president of the European Council, Herman Van Rompuy, said in the wake of the agreement, “An intergovernmental treaty was not my first preference, nor that of . . . most of the member states . . . It will not be easy, also legally speaking. I count on everybody to be constructive, bearing in mind what is at stake.”[1] Investors were “largely dismissive” of the Council meeting at which the extra-E.U. agreement on strengthening the enforcement mechanism of state deficit and debt limits had been reached at the end of the previous week. Alan Brown, chief investment officer at Schroders Investment Management, which had at the time almost $300 billion under management, said of the results of the Council meeting, “Yes, it was what I expected, and yes, I was disappointed.”[2] Schroders was backing up this view with a modest bet against the euro. Relatedly, Barclays was forecasting the currency to fall from $1.30 on December 13, 2011 to $1.25 by June 2012. Besides the pessimism on the “intergovernmental treaty” as well as a possible increase of funds from the $500 billion cap on the agenda at a Council meeting in March 2012, the sheer uncertainty described by Van Rompuy lowers the value of the announced agreement and the outlook concerning the viability of the euro as well as the E.U. itself.
The full essay is at "Essays on the E.U. Political Economy," available at Amazon.
1. Steven Erlanger and Stephen Castle, “Europe
United, Minus One: A Firm German Imprint on an E.U. Transformed,” International
Herald Tribune, December 10-11, 2011.
2. Matina Stevis, Frances Robinson, and Marcin
Sobczyk, “Legal Uncertainty Imperils EU Agreement,” The Wall Street
Journal, December 14, 2011; Tom Lauricella, “Euro at 11-Month Low,” The
Wall Street Journal, December 14, 2011.
