Euro zone in crisis - Solidarity may provide a solution

THE political response to the Greek debt and social crisis has failed to convince markets that a plausible strategy is in place — or that if one was that it might be enacted.

The Greek bailout, on which so many hopes were pinned, is not working. Neither is the euro zone’s piecemeal response to the wider EU debt crisis.

The cultural diversity in the EU is exemplified by German orthodoxy demanding that measures, no matter how stark, be put in place to control spending while, at the other end of the spectrum, Greece struggles to deliver on its commitments on reform.

This debilitating divergence was seen again in last week’s resignation by Jürgen Stark from the European Central Bank’s executive council. He is the second German to quit the ECB hierarchy because he could not agree with proposals aimed at preventing a meltdown of the European banking system.

In an interview given just before he resigned he advised us to cut our budget deficit faster than was agreed under the terms of the EU-IMF bailout. He also pointed out that Irish public servants are among the best rewarded in Europe and that their pay should be brought into line with that of their colleagues elsewhere.

No matter how wise neither of these suggestions can be greeted with any great cheer as they imply reduced circumstances for nearly everyone in this society. That, however, does not mean that they can be easily refuted or avoided.

The suggestion on public sector pay has apparently been knocked on the head by the Minister for Public Expenditure and Reform, Brendan Howlin, and his party leader, Tánaiste Eamon Gilmore, who said he was “annoyed” with Dr Stark’s intervention. He could not however deny the doctor’s prognosis.

It is a pity that those responses were not more nuanced, that they did not rightly protect the great majority of public workers while recognising that far too many of our top-tier public sector and semi-state workers are in a disproportionately privilege position. As the crisis deepens those domestic issues may seem irrelevant but they must be resolved nevertheless.

Yesterday’s assurances from Chancellor Merkel which sought to quash talk of default were not as authoritative as the situation required. Asked whether such a default would doom the euro, she answered: “We are using all the tools we have to prevent this. We need to avoid all disorderly processes with regards to the euro.”

This concern was reflected in America’s expression of doubt about the euro zone’s inability to stem its debt crisis. President Barack Obama made his concerns known when he said that euro zone leaders needed to show markets they were taking responsibility for the crisis. Weakness in the global economy would persist so long as it is not resolved, he warned.

As we have squandered our economic independence we can only look on, hoping that Europe’s political leadership can devise measures on the scale needed to avert a deepening of the crisis or, dread of dreads, a euro zone collapse. Such an eventuality would be a greater challenge to this small, open economy than any faced in more than half a century.