The informal dinner last night of EU heads of state achieved the pursued aims of: a) getting clear on each country's views on how to deal with the financial and economic crisis, examining areas of potential agreement so that decisions can be taken at the end of next month, and b) examining the situation in Greece. On the latter issue, the politicians and the president of the European Commission made their usual statements that they want Greece to remain in the eurozone as long as its respects its commitments, but there is growing scepticism about whether it will be able to respect its commitments. Behind the scenes, people are starting to look at the practicalities of Greece leaving the single currency.
Change of method. The discussions about policies and measures to ensure that budget discipline goes hand-in-hand with economic recovery did not take the usual route of starting with a Franco-German policy statement. This time, there were not even any prior consultations between the French president and the German chancellor and Merkel was often the first to reject or at least criticise ideas backed by Hollande. It was in fact Mario Monti who played the same intermediary role as he had been given by Barack Obama at the G8 meeting last Saturday of finding common ground, smoothing over some areas of disagreement and putting forward ideas that he himself backs, but Merkel rejects, like not including some investment expenditure when calculating budget deficits.
The talks covered a huge range of issues, but I will not be examining issues discussed in yesterday's newsletter. A few areas of agreement started to emerge, but the splits among the member states are deep and plentiful. Even something that in theory should have been unproblematic - giving the European Investment Bank (EIB) a greater role and more cash - was subject to reservations from the United Kingdom. The general pessimism about the summit's outcome is unjustified, in my view, and is certainly excessively gloomy. The sensitive issue of Greece was not really discussed. Instead, the customary statements were made.
Greece and the euro - justified scepticism or a way of applying pressure? The way I see it, the understandable semantic acrobatics do not contradict the views I developed in my previous column (in issue 10618) that Greece will leave the eurozone in July 2012, but will remain within the European Union. Leaving the euro will be hugely problematical and risky, but the way Greece is behaving leaves no alternative, in my opinion. And ever more people are starting to see it the same way. The front page editorial of French newspaper Le Monde on 23 May went even further: “It is not possible for a small country which refuses to stick to the rules to continue to jeopardise the whole continent”. The editorialist started by listing the EU's “huge solidarity” with Greece: “Twelve crisis-management summits, two mega bailouts, exceptional financial aid and a partial write-off of debt. In total, since January 2010 each of the eleven million Greeks, civil servants in Athens as much as shipbuilders in the Pireus, has already received the equivalent of €31,000, paid for in one way or another by European taxpayers”. Greece leaving the eurozone “threatens to split the eurozone apart” and would be disastrous for the Greeks themselves. But the decision is in their hands: “If they want to remain in the club, they will have to accept the club rules and abide by them. (…) Otherwise, Europe will have to act accordingly, and without scruples”.
Needless to say, the first victims of the attitude taken by the Greeks are the people of Portugal, Ireland, Spain and elsewhere, and the first beneficiaries are to be found in the financial world. I should add that much of the European dream would be destroyed if the euro collapses, which is likely to happen if no radical changes are made.
I am aware of the argument that the current firm line on Greece is to apply maximum pressure to get the Greeks to agree to implement the second scenario: that of keeping to the measures they have agreed to. The current firm line would therefore be a means of pressure so that the Greeks themselves understand what will happen if they don't change their behaviour. I don't personally believe this, because the situation in the country is such that it is not possible to make the changes needed to respect the rules of the single currency. It will not be possible for the eurozone to operate properly if we carry on like this, with the disastrous consequences for the other member states and their people, not to mention the future of the European project.
Stubborn obstacles. Even leaving aside the desperate doubts about what to do about Greece, the situation is complicated and unclear and will remain so even if the disagreements among the member states are ironed out at the end of next month. If compromises are reached by then on the current controversies, then it will take time for economic stimulus measures to come into practice and start to take effect and improve ordinary people's lives. For example, if a financial transactions tax is brought in, how long will it take before it provides the forecast income to the European Union budget? Passing decisions is well and good, but they have to be properly implemented before they have any impact. And very often, in order to make an impact, they have to be introduced by competent national authorities. There are plenty of examples of fraudulent use of European aid.
Moreover, the idea of a two-speed Europe, with varying levels of integration, will take years to be made manifest. It will become increasingly necessary if member states continue to disagree about the scope of the European project, but will be tough to bring about in practice.
Despite these problems and the prevalent scepticism in public opinion, I believe that there are plenty of positive outcomes and reasons to be cheerful and will be returning to this shortly.
(FR/transl.fl)