Another crisis could spell the end for the euro

WHEN the boom was at its height few would have envisaged that the euro would be in crisis in such a short space of time.

Crisis is no longer too strong a word for the pressure on the eurozone economies and, by implication, the single currency.

Germany’s decision to let the Greeks swing for a few weeks before finally backing the €110 billion bailout is the clearest signal yet that one of the chief anchors of the EU ideal may be growing tired of the project.

The severity of the measures imposed on Greece by the EU and the IMF have already cost lives in Greece. This is not what the dream of a new, united, peaceful Europe was meant to be.

If the rioting in Greece persists and the government buckles, the next chapter on the region’s history could be on how the dream died.

Germany has been pivotal to the evolution of the EU and is a reminder that it is not gong to be a bottomless pit to bail out every financially delinquent state.

German chancellor Angela Merkel held out for tougher sanctions and some suggest her stance showed scant regard for the impact her actions would have on the markets, which resulted in bond rates becoming more expensive for Spain Portugal, Greece and us.

One more act of delinquency from any of the above mentioned countries at this stage and it could be curtains for the euro.

The reality is the doughty Germans are getting tired of being the paymasters of Europe and do not to feel any further moral obligations to underpin a semi-bankrupt Europe. Increasingly the failure of the centre to hold as weaker member states falter begs the question about a federal Europe.

From where we stand in Ireland that is another irony that will not be lost on those who voted down the Lisbon treaty because they suspected it contained the seeds to a federal Europe.

Whether that was accurate or not is irrelevant in the new climate engulfing the whole EU debate.

It is becoming clear from the failure of some states, Ireland included, to stick to tight budgetary guidelines, that if the EU is to have a long-term future we may have to move to a federal system to ensure fiscal responsibility across all member states.

The EU has been painstakingly built up since the Treaty of Paris was signed in 1951.

France, Italy and the Benelux countries, together with West Germany, signed the Treaty of Paris that resulted in the European Coal and Steel Community the following year.

So far the story has been positive in both political and economic terms for most participants.

The Greeks clearly disagree at this stage and the killing of three women bankers, one of whom was pregnant, during the Athens riots on Wednesday, is about as far away from what this bold and brave project hoped to achieve.

With such disparate countries involved, the euro was probably ill-conceived and it will face more trouble in the period ahead if Portugal, Spain or even Ireland face further pressure to reform their national finances to the satisfaction of the markets.

This is the toughest test ever faced by the EU and its member states and those who deemed the initiatives to be ill-conceived from the outset are nodding sagely saying “we told you so”.

Whatever about the formation of the EU itself the single currency looks to have been a bridge too far.

The problem now is that we are stuck with it.

This process will take time and there seems little doubt now that moves will have to be made soon to set new guidelines for the eurozone to ensure the entire system isn’t discredited.

The real shame is that a movement intended to bring greater cohesion to the entire European project is currently going in the opposite direction to what it intended.

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Wednesday, September 22, 2021

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