Eurozone crisis response ‘too little, too late’

THE eurozone’s misery stems largely from a political response which has been “too little, too late” and Europe must find the courage to do what is needed, the EU’s trade chief said yesterday, warning it was now “two to midnight”.

European Trade Commissioner Karel De Gucht slammed political dithering and failure to enforce eurozone rules, urging governments to act as one.

Eurozone leaders meet on October 23 to discuss further aid for Greece, with countries such as Germany and the Netherlands frustrated by Athens’s lack of progress on privatisation and other reforms.

A larger write-down on Greek debt, bank recapitalisation and tighter controls are all on the agenda.

Calling the crisis a “formidable eye-opener” De Gucht said a pattern had emerged of markets attacking highly indebted eurozone states, driving down the value of their bonds.

“Emergency meetings make sweeping announcements; but on closer inspection, markets are unimpressed and the cycle starts all over again. It is now two to midnight; this vicious circle must be stopped,” he said in Berlin.

“If Europe’s political class is unable to take unpopular decisions on deficits, haircuts, the size of the European Financial Stability Facility (EFSF) and bank recapitalisation, the monetary union may well unravel with truly incalculable economic and political costs.”

De Gucht said he believed new rules that had been put in place should allow the eurozone to avert future crises, but the bloc still faced a huge challenge in sorting out the crisis of today.

The Achilles’ tendon of the eurozone lay in its macroeconomic regime, he said. “The debate that led to the Lisbon treaty did not deal in any depth with economic and monetary union...it is the storm we have been in since 2008 that has laid bare the defects of the construction of the euro zone: the rules were inadequate and enforcement mechanisms too weak.”

Keeping global markets for trade open was a key part of recovery, he said. De Gucht highlighted that with regard to foreign policy the EU remained a “very complex entity to deal with” for third country partners.

High Representative for Foreign Policy Catherine Ashton wore “not two, but three if not four hats”, he said. She could request the assistance of other commissioners, but this was not a perfect situation as “personal chemistry” mattered in foreign matters, he added.

Disruptive change in Europe had seen people resort to their old national frameworks, he said, but to solve Europe’s problems there was no real alternative than “more Europe”.