Eurozone crisis - Just one step in the right direction
The Bundestag vote showed that the strongest economy in Europe knew what had to be done and where the best interests of Germany, the eurozone and the European project lie. Had she not succeeded, had Germany cowered and put its domestic interests first, we would all have been a step closer to the kind of calamity no one with the flimsiest sense of history wants to contemplate, much less endure.
Despite this, US President Barack Obama continued to attack the EU’s crisis management, saying: “In Europe, we haven’t seen them deal with their financial system and banking system as effectively as they need to.”
As this criticism has more than a pinch of truth to it, it must be hoped that some grand scheme to finally confront Europe’s debt crisis is nearing completion, one that may allay market fears and restore the kind of stability any recovery depends on.
Despite American impatience there was a sense of relief that the Chancellor’s proposals were endorsedyesterday. French Finance Minister Francois Baroin said the Bundestag vote “confirms German determination to preserve the financial stability of the eurozone”.
As the structure, much less the detail, of any grand scheme is über sensitive — not to mention something approaching a last throw of the dice — officials preparing ways of leveraging up the rescue fund have kept those legally and politically fraught ideas under wraps. It is likely that they will involve the surrender of more financial autonomy to the centre and it will be a great challenge for politicians of all nationalities to convince their compatriots to agree to this — if that is what they decide to do.
After it welcomed yesterday’s vote the European Commission said it was confident the continuing ratification process would be complete throughout the 17-nation currency area within weeks. Let us hope they are right because any delay greatly increases risk and damages confidence.
Despite the Bundestag vote, developments in Spain and Italy emphasised the depth of the challenge still facing the eurozone.
Spain’s ruling Socialists cancelled plans to boost public coffers by selling part of the state lottery for up to €9 billion in the face of tough market conditions, political opposition and banks’ funding concerns.
It is not to difficult to see that similar difficulties might stymie the sale of Irish Government assets and undermine any progress we have made to date on fulfilling the terms of out bailout deal with the troika.
As Italy paid the highest yield on a 10-year bond since the introduction of the euro in 1999, troika officials were in Athens checking that Greece has met the terms of its bailout programme. That government will run out of money to pay salaries and pensions within weeks unless it receives the next €8bn in emergency loans. Let us hope that the troika are satisfied and that the Greeks get the money they need, because if Greece collapses in chaos we are all a step closer to the edge.
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