There probably hasn’t been a meeting of European finance ministers as important as the
one tonight. The euro is still at risk; with new governments in Spain, Italy, and Greece incapable of calming the markets, and Angela Merkel unwilling to let the ECB act. In a speech in Berlin,
Polish foreign minister Radek Sikorski put it clearly: ‘I fear German power less than I am beginning to fear German inactivity.’ It is a fear shared in London and Paris as well.
The 17 finance ministers will discuss the range of options on the table: from setting up an EU Treasury to the possibility of eurobonds or establishing a supra-national process to monitor national budgets. As Thomas Klau, a Euro expert, told me: ‘Foreign investors are beginning to lose faith in the eurozone’s ability to survive its first big crisis. Waiting to take drastic action is an luxury eurozone governments can no longer afford.’
But none of the options are easy or quick. Changing treaties takes time and may require a referendum in some EU states, depending on what kind of change is needed. And even if those changes happen, the original problem has still not been solved, of course. I still remain very sceptical that the Germans will want to keep stumping up for other countries, such as Portugal. The EU always was a ‘solidarity union’ — what else is the CAP and the structural funds? — but the funds were always small compared to Europe’s GDP, and given to groups seen as deserving (farmers in post-World War II Europe and newly-liberated Eastern Europeans after the end of the Cold War). A Eurobond-backed, Treasury-run scheme would be solidarity of a different order of magnitude.
Yet everyone but the foolhardy should hope that this evening’s meeting is some kind of success. For make no mistake: if the Euro collapses, bank lending will freeze, stock markets would likely crash, and Europe’s economies — including Britain’s — would dive. UBS even thinks that, for some countries, the drop might be as much as 50 per cent of GDP. So wish the europhiles well today.
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