Greece has got a pat on the back in its first post-bailout report from the European Commission, the ECB and the IMF. “The programme is off to a very strong start,” they said in Athens. So that should be a green light for the next €9bn tranche of the total €110bn rescue package to be paid out next month.
But there is a fly in the ointment. Plucky little Slovakia, a eurozone member state that knows all about tough austerity measures, is refusing to sign up for its contribution to the rescue plan.
In spite of fierce pressure from Brussels, the new government in Bratislava is adamant that it would be wrong to pay its hard-earned taxpayers’ money to another eurozone member that has “consistently carried out irresponsible fiscal policy.” It is prepared to back the European Financial Stability Facility – the €750bn standby rescue package set up to stop contagion from the Greek crisis – but not the original Greek bailout.
Rumours are flying thick and fast that the troubles of Spain’s banking sector will require emergency attention at Thursday’s summit of European Union leaders in Brussels. But it appears highly improbable that Spain will ask for help from the emergency financial stabilisation fund that EU finance ministers agreed to set up last month. For one thing, the fund is not yet fully up and running. For another, the Spanish government is emphatically not shut out of credit markets – a point underlined this morning by the successful issuance of €5bn worth of short-term government bills.
Spain’s economic vulnerabilities are obvious, and the implications of a Spanish crisis for the rest of the eurozone are no less clear. French and German banks alone are exposed to some $450bn of Spanish debt, according to a report just published by the Bank for International Settlements.
But it is worth repeating that Spain is not Greece. The Greek crisis originated in decades of mismanagement of the public finances, plus an unhealthy culture of corruption and use of the state for political patronage. Although such practices are not unknown in Spain – and not unknown in the US, China and numerous other countries, for that matter – they have never attained Greek levels.
The European Union’s rotating presidency will pass on July 1 from Spain to Belgium, and then six months later from Belgium to Hungary. The direction of EU affairs will therefore soon be in the hands of a centre-right Hungarian government that has wasted little time, since its massive election victory in April, in asserting its patriotic – some would say ‘nationalist’ – credentials.
Policymakers in Brussels are anxiously watching this development. They recall the unhappy experience of the Czech Republic’s EU presidency in the first half of 2009. The last thing they want is another turbulent presidency run by one of the 10 central and eastern European countries that joined the EU in 2004-2007. It would give critics of EU enlargement even more ammunition to fight with.
There are all sorts of threats to the European Union’s unity, but something tells me that the biggest threat isn’t the Visegrad group. This appears to be a view not shared by President Nicolas Sarkozy of France.
Speaking after the October 29-30 EU summit in Brussels, Sarkozy criticised the fact that the leaders of the four Visegrad countries – the Czech Republic, Hungary, Poland and Slovakia – had held a pre-summit meeting to co-ordinate their positions. “If they were to meet regularly before each Council, that would raise some questions,” Sarkozy said.
After the fall of communism in central and eastern Europe, one compelling argument for bringing the region into the European Union was that the experience of prosperity, democracy and everyday multinational co-operation would ease national and ethnic tensions there. Who knew, perhaps eventually it would get rid of them altogether, just as France and Germany were gradually reconciled after the second world war?
A flare-up of tensions last month between Slovakia and Hungary will serve as proof, to those western Europeans who were always hostile to enlargement, that such hopes were premature. Worse still, it will confirm them in their opinion that, by admitting the two countries in 2004, all the EU succeeded in doing was to trap a nasty virus inside its own borders.