European lifeline - Patience may pay off in debt war

The weekend communiqué, 307 words issued at 4.20am on Sunday by eurozone leaders, suggests that the distant, flickering light at the end of the tunnel is real.

It confirms that our Government’s commitment to patiently playing the long game, to first re-establishing Ireland’s credibility and stability despite many loud, testosterone-fuelled suggestions to the contrary, may pay dividends by achieving an agreement on reducing our impossible debt burden.

Though nothing can be signed off until after the October summit it is, in normal circumstances, unimaginable that the debt-reduction assumption central to the statement will not be made real. If, and “if” is always the pivotal word in these challenging times, the noose of Ireland’s private bank debt becomes — comparatively — a tolerable set of handcuffs then the Government will have been vindicated and the road ahead will seem a little less forbidding.

Even considering the shape of the deal would be speculative but it may not be quite counting our chickens before they are hatched to consider the framework and scale advanced by senior sources. They suggest a favourable outcome would allow Ireland’s overall debt fall from a peak of 117% of GDP to around 100%. That would mean something around €34bn, or slightly more than half of our bank rescue package.

If this can be realised with the support of our EU partners and the relative security the EU still represents, then it will show the lunacy, the fantasy and absolute disregard for the realities of our systems and international relationships that shape the policies of those who advanced the impossible burn-the-bondholders populism. The prospect also reflects a changed, less gruff, a less take-it-or-leave Europe.

Despite Finnish opposition, it is unknown how that might finally influence outcomes, the October summit would have been impossible if German Chancellor Angela Merkel still enjoyed the unswerving support of France’s former president Nicolas Sarkozy. His successor François Hollande, along with Italy’s Mario Monti, have diluted the German/Franco hegemony that pursued austerity and increasingly strict disciplines without counterbalancing measures to stimulate growth.

This shift is as welcome as it was essential, especially so as the eurozone has just posted record figures for people out of work. Around 17.56m people were unemployed in the 17-nation bloc in May, or 11.1% of the working population. Total EU unemployment figures reach something around 25m out of a population of just over 500m. Ireland’s rate is 14.6% but Spain has the highest rate at 24.6% with, frighteningly, more than one-in-two people under 25 out of work. These figures are unsustainable. Though the prospect of a deal in October is not a solution it would be an essential part in creating an environment that might be.

It is also a meaningful step towards addressing the underlying causes of the euro crisis and that is more than welcome as the consequences of the collapse of our currency do not bear thinking about.

Unfortunately it does not bridge the gap between Government income and expenditure. That challenge is ours alone and if it is not quickly addressed any progress that might be made in October will be fleeting.