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All a blur at the Euro-summit

A naysaying chancellor from Germany, allied with a fickle president from France, up against massive but irresolute resistance at the EU's 16/17 December summit. Is this how Europe saves its currency?

Published on 16 December 2010 at 14:41

The crisis has put Europe in a strange mood. If it had to be summed up in a nutshell: ambivalent. Some want to rescue their over-indebted partners at any price, others don’t. Some want to keep the euro, others want their national currency back. Nothing is the way it seemed only a year ago.

High-ranking Polish diplomats posted in Brussels are a credit to their profession when asked over beers whether their country still wants the euro at all. They tend to sigh and say, “Ah, yes, the euro…. Seems to be in rather hot water. Still and all, though, Warsaw naturally stands by its desire to trade in the zloty for the single currency. Only there’s no telling when that might be.” Followed by a diplomatic wink. But first, they say, we’ve got to wait and see whether the rescue funds suffice to liquidate those mountains of debt. We admit though we’ve been pretty relieved in recent weeks that we’re not members of the euro club – that’s understandable under the circumstances, isn’t it?

Juncker has now joined the ranks of the vacillators

The Poles feel much the same way about the euro that a number of European leaders feel about the German proposals: ambivalent. On a scale from outright rejection to full endorsement, most countries are dithering somewhere in the middle, says a senior diplomat from a smaller country. Yes, the Germans were often right on the merits. But we didn’t want to be constantly tagging along behind Berlin. Or behind Berlin and Paris. “We’ve lost our appetite for Franco-German proposals,” says a high-ranking diplomat from a big country.

Europe’s vacillating government heads also bear some of the blame for the ambient ambivalence. French president Nicolas Sarkozy wanted to convince his counterparts to borrow several billion extra euros before the end of the year to give their economies a “growth jolt” and catapult them out of the crisis. Two multi-billion-euro rescue packages later, the bustling Frenchman seems to have been reduced to Angela Merkel’s walking talking shadow.

And Luxembourg’s prime minister Jean-Claude Juncker has now joined the ranks of the vacillators. In much-hyped public appearances he banged the drum for eurobonds to finance some of the debts – without much success. After flat refusals from Berlin and Paris, eurobonds didn’t even make it onto the summit agenda. Whereupon Juncker had his foreign minister Asselborn explain that the whole matter really isn’t all that urgent. And a few hours before the summit started, he again announced that of course he would be tabling his proposal there.

“A perfectly ordinary summit”

With such seesawing announcements, the elected president of the Euro Group, of all people, is taking confusion over how to save the currency to a new level. Plus he is incensing some of his fellow eurobondsmen, who now want to let on where the whole idea got started: they say there are some zealous economists and officials in Brussels think tanks and in the European Commission who are hell bent on getting the nations of Europe to close ranks. Many of them hail from the Community’s founding nations. Now they want to household jointly and lay down comparable social standards for all. But they are up against nationalistic headwinds blowing in from many countries – which is why the EU commissioners have been keeping these ideas under wraps for the time being.

These indecisive politicians aren’t helping to solve the crisis one bit, as a look at the reactions from financial and stock market executives shows. They’re watching the goings-on Brussels more or less attentively – and continuing to bet against the euro. As a matter of fact, the ratings agencies threatened to downgrade some more deeply-indebted countries right before the summit got under way. So now the heads of state and government are doing their best to make the meeting look like a regular unruffled working session. “A perfectly ordinary summit,” so they say in German government circles. But they’re feeling a little queasy nonetheless. European Central Bank chief Jean-Claude Trichet is coming, too – which is unusual. And they recall that two days after he spoke at the special summit on the Greek crisis in May, the EU decided to put together a €750 billion rescue parachute.

Translated from the German by Eric Rosencrantz

The summit

Eurobonds or just a little Lisbon rewrite?

The European Council meeting on 16/17 December “may well prove the summit of discord”,fears Libération, as the eurobond issue rives the EU in two. “On the one hand, those (spearheaded by Germany and France) who said no to the eurobond scheme. On the other, Luxembourg, Italy, Belgium, Spain, Portugal and Greece.”

The Parisian daily explains the eurobonds scheme: “The Union would jointly underwrite public debt issues in its own name, the way the US Treasury does. In that manner, according to its proponents’ pitch, the EU could cover for a state that is unable to finance its budget on the markets at acceptable interest rates, as happened to Greece and Ireland. The target of the European debt agency, as proposed by Juncker and the Italian finance minister (Giulio Tremonti), would be to issue eurobonds worth 40% of EU GDP (€11,970 billion)."

But officially, points out the French financial daily Les Echos, the Council is only supposed to deliberate on one subject: “an amendment to the Lisbon Treaty, initially called for by Germany, to kick off the creation of a permanent financial stability mechanism for the eurozone”. The paper notes that “not a single country is still holding out against a treaty amendment, provided it is minimal. Everyone has now got the message: it’s all about giving German chancellor Angela Merkel the legal footing she needs, in a faceoff with her very punctiliousConstitutional Court, to justify German input in shoring up the eurozone.”

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