Reuters Jan Strupczewski gives more details of the EU Commission report first leaked by Der Spiegel. According to Strupczewski the "new European Commission report has expressed concern about gaps in competitiveness that could undermine confidence in the euro zone and point to tensions related to wage levels and capital flows in the 16-member club." The report was prepared for the finance ministers meeting on January 16.

Of particular interest the report acknowledges that the real effective exchange rate for Greece, Spain and Portugal is overvalued by more than 10 percent - I would put the Spanish figure at nearer 20%, but still, a start is a start - and this gives us an indication of how much either wages and prices in these countries have to fall, or productivity rise, to make them competitive again, given that they are locked into the euro.

Sometimes it surprises me what some people consider to be news. Tony Barber points out today in the FT Brussels blog that the EU has the power to mount bailouts of any member country under "exceptional circumstances." As Tony rightly points out, under Article 122 of the EU’s Lisbon treaty, which came into effect last December, when a member-state is:

"in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council [of national governments], on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member-state concerned.”

This is the conclusion drawn - rather surprisingly - not by some bank analyst, or by a Credit Ratings Agency, but by the European Commission itself, according to the contents of a report "leaked" to the German magazine Der Spiegel at the end of last week. "(The imbalances) weaken trust in the euro and endanger the cohesion of the monetary union."

Here is a rough translation of the Der Spiegel report: