Debt crisis - EU must act as one to try to end crisis

AT a moment when so much is uncertain, at a moment when so many tottering citadels begin to look as if they might tumble into history’s dust, anything resembling a certainty is to be cherished.

Unfortunately, it is a worrying certainty that this will be a volatile week on the world’s financial markets. This time next week we could have a better idea of what the future might hold but, then again, we may not. Doubt and prevarication are the currency of the day.

If the markets reject the proposals made after yesterday’s emergency discussions between Europe’s finance leaders, and if the reaction to the downgrading of American sovereign debt last week pushes the needle much deeper into the red zone, then it may be time for us all to do whatever it is we do in moments approaching real crisis.

Finance ministers from the G7 countries also held emergency talks in an effort to calm markets before they reopened this morning.

Governments, even the world’s most powerful, can only look on hoping that their latest attempt to contain Europe’s and America’s escalating debt crisis inspires the kind of confidence investors demand if they are to support bankrupt administrations and, in turn, bankrupt societies.

The whole situation is made even more nerve-wracking by the fact that so many governments, relatively small ones like ours, don’t have game-changing clout and can only look over the shoulders of the decision-makers and hope it all works out. For individuals brave enough to consider the implications of failure the prospect looks very grim and almost unimaginable.

Once again the skewed relationship between the business of money and the business of government and society is at a dangerous crossroads. Most of the citizens of the countries involved can only look on hoping that sanity prevails, some sort of stability and growth

eventually become possible and that, most importantly, someone somewhere knows what they are doing.

The potential to destroy wealth, either in property, savings, shares or pensions is spectacular. The threat to services that governments organise to stand between people and life’s harsh realities is very great too.

It requires a degree of optimism to suggest that those terrible scenarios can still be avoided — and they most certainly can — but if they are then the solution will be more radical than anything considered heretofore.

One of the proposals beginning to get traction involves euro bonds along with a range of mandatory performance standards. In the simplest terms, all EU governments would support these bonds but only countries that satisfied very strict reform and spending criteria would be offered them.

This would mean the surrender of even more autonomy, far more than we have already ceded to the EU/ECB/IMF troika. Less than a century after achieving what we though was independence we might need to think through what this actually means. It is at least as important to think through what it would mean if we decide that a bankrupt sovereignty is better than a dependent, supervised faux solvency.

That is if we still have a choice this time tomorrow.