An unhappy bunny

Not a name that commands instant recognition, but Yves Mersch is a council member of the European Central Bank – and therefore is not without influence and power in the places where it matters.

And our Mr Mersch is an unhappy bunny – there are a lot of them around these days. In fact, he is a very unhappy bunny, his fur bristling with indignation to the point where he has broken ranks and started openly criticising the Franco-German attempts to emasculate the growth and stability pact, taking a swipe at Italy for good measure.

"Some member states haven't understood the reasoning behind the introduction of the euro," says Mersch, speaking in an interview after an investment dinner in Luxembourg.

He vociferously objects to the proposals to dilute the pact and does not agree to the list of "extenuating circumstances" that would exempt countries that post deficits over the limit of 3 percent of gross domestic product from sanctions.

And, with a hint of steel fist inside the mailed glove, Mersch - who is also head of the Luxembourg central bank – has said that the ECB's governing council will shortly make an official statement about the proposed changes to the stability pact. This is likely to be when ECB President Jean-Claude Trichet testifies to a European Parliament committee on 14 March.

With the central bankers against the so-called "reforms", and growing opposition from the smaller countries, led by the Netherlands and Austria, France and Germany are beginning to have to confront the reality of how much power they have ceded in adopting the single currency.

And, as we have observed before, it ain't a pretty sight.