Saving the euro - Rescue deal may cost us all dearly

YESTERDAY’S Brussels meeting of the 27 European Union leaders focussed on saving the euro but underlined the difficulty in getting 27 governments to act as one, especially at such a critical moment.

No matter what arrangements are agreed in advance of Wednesday’s climactic meeting, they will have an impact on our ability to rejuvenate our economy and tackle the jobs crisis choking the country. This situation is not made any more palatable by the realisation that Ireland’s influence may not match even our ambitions around changing the terms of our November bailout deal.

Last March, at his first EU summit, Taoiseach Enda Kenny was given a bloody nose by French President Nicholas Sarkozy when he had the temerity to suggest we needed to renegotiate the crippling terms of the rescue package his Government inherited.

It is certain that Mr Kenny — and the rest of us — still wants those terms reviewed but he will have to play his cards differently. Unfolding events in Greece and Italy may facilitate those ambitions by setting a precedent we would gladly follow.

However, any review is predicated on this week’s talks reaching a conclusion proportionate to the crisis facing the eurozone and the EU. This is not the first or second time we have been at this point and another finger-in-the-dyke response will exacerbate rather than resolve the crisis.

Europe’s banks need more capital but confronting the underlying sovereign debt problem is the only game changer worth pursuing. This will be resolved, if at all, only with ECB lending and a commitment to stimulate economies more or less immediately. Time has become as scarce as capital.

Yesterday EU leaders pressurised Italy to accelerate economic reforms to avoid a meltdown like the one destabilising Greece. That German Chancellor Angela Merkel and President Nicholas Sarkozy had a private 30-minute meeting with Italian Prime Minister Silvio Berlusconi before the main business of the day may not inspire the kind of confidence needed today. Nothing in Mr Berlusconi’s political career suggests he is the right man in the right place at the right time.

However, agreement will be reached before Wednesday on reducing Greece’s debt burden, strengthening European banks, improving eurozone economic governance and maximising the firepower of the EFSF rescue fund to stop contagion engulfing bigger states, but it will come a cost.

So far the EU’s strongest economies have not been enthusiastic about the kind of radical measures needed. This is understandable as the measures would impose massive cost and sacrifice on the larger EU states. So, participation and support will come with a price tag.

That price may be surrendering more control of our economic affairs to centralised EU authority.

That would certainly be galling and humiliating but, no matter how we beat our chest about independence, we don’t seem to have many options.

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