Kritiek OECD op Stabiliteitspact (en)

The organisation for economic cooperation and development, OECD, criticised at the Stability and Growth Pact, which underpins the Euro, saying that it has not worked and that it should be improved. This is the second substantial blow to the Pact after Commission president, Romano Prodi, called in "stupid" last month.

Jean-Philippe Cotis, the OECD's recently-appointed chief economist, said on Thursday that the Pact rules "haven't worked." He went on to say that the Pact needed to pay more attention to cyclically-adjusted deficits - a step already proposed by the Commission and accepted in principal by EU finance ministers, notes the Financial Times.

The Commission will next week publish plans to make the pact more flexible. Although the current 3 per cent ceiling will stay, countries with low debt will be given more leeway to run modest, short-term deficits.

In its twice-yearly publication, Economic Outlook, the OECD also said that recovery in the member states was unlikely to increase until the end of the first quarter next year and predicted a more robust recovery in 2004.

Denmark is doing well outside the Eurozone

The OECD predicts that the 2004 unemployment rate in the 11 Eurozone countries will be 8.3 per cent, compared to only 4.1 per cent in Denmark.

OECD economist Deborah Rosevaere admits, according to Politiken, that the Danish economy is doing quite well outside the eurozone. During the campaign before the September 2000 referendum on the euro, it was predicted that Denmark would see growing unemployment.

According to Ms Roseveare, Denmark's decision to lock its currency to the euro mean that the country is subject to the same economic-political framework as the euro countries, writes Politiken.

The OECD report does, however, warn that Denmark is running the risk of wage rises. Denmark's has joined the two first phases of the EMU, but not the third, Euro membership. It is, however, a national political decision that the krone should be linked to the euro. But this decision could be reversed by the Folketinget, Danish parliament, at any time.