It was something of a mystery. Emergency conference calls about the future of the
Eurozone were being made yesterday, but there was no news of those discussions. As it turned out, this was
for the best of all possible reasons: there was no news to report. Angela Merkel and Nicolas Sarkozy announced no new measures to alleviate the sovereign debt crisis; rather, they merely declared
“solidarity” with Greece and assured the markets that
Greece would not be forced from the single currency.
Their words seem to have assuaged the markets for the moment, but only the most brazen optimist would bet on the rally being long lived. Tests of confidence will come later today when troubled Spain holds a debt auction and the EU’s interim economic forecasts are expected to be downgraded. As John Redwood notes, none of Europe’s underlying weaknesses have been resolved by this quick phone.
Apparently, the mood in Brussels remains as grim as ever and no one believes that Merkel and Sarkozy’s words will give anything other than the most transient relief. It is a sign of the times that the BRIC countries will meet next week to discuss solutions to the European crisis; an indication of changing global economic realities and the fact that Europe is no longer the master of its own fate. The developing world may yet put its money where Merkel and Sarkozy, hampered by political difficulties at home and abroad, can only put their mouths.
The European leaders’ vows of solidarity are poor cover for the political inertia that has beset the continent throughout this crisis. Germany’s opposition to a transfer union is well known and plenty of officials, economists, and journalists are now blaming German “hotheads” for the latest act in this drama. But, as Jeremy Warner says, the political intransigence is scarcely surprising given that political union did not accompany monetary union. This was odd, given Brussels’ mantra of “ever closer union”. Brussels is alive to its error now, recognising that the sovereign debt crisis poses an existential threat to the European Union’s project. Yesterday, Commission President Jose Manuel Barosso said, “This is a fight for the political future of Europe. This is a fight for European integration itself.” It’s farce or tragedy, depending on your proclivities.
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