The consensus, such as it is, on the eurozone crisis was neatly summed up on Monday by Hugo Dixon, author and editor at large of Reuters News: “The euro crisis is sleeping, not dead.”
What about the crisis in Greece? Over the past four to five years Europe, supported by the International Monetary Fund, has invested more time, effort and money in Greece than in any other struggling eurozone state. The aim is to reform a country so inefficiently governed, so riddled with corruption and so burdened with debt that it seemed, for certain spells in 2011 and 2012, to pose a threat to the eurozone’s survival.
So it seems reasonable to ask: if this time, effort and money have not changed Greece for the better, what has it all been for? Read more
By Gideon Rachman
“Whatever it takes.” Mario Draghi’s declaration that he would save the euro could well go down as the most effective three-word statement by a Roman since Julius Caesar’s veni, vidi, vici.
By Gideon Rachman
Germany has surrendered and the euro is saved. That seems to be the markets’ interpretation of last week’s ruling by the German constitutional court on the European Central Bank’s “whatever it takes” policy to save the single currency. The judges’ ruling essentially boiled down to this: “We don’t like what the ECB is doing. We think it illegal. But only the European Court of Justice can strike it down.”
Europe’s recovery proceeds apace – at least on bond markets. When it comes to public opinion, it’s a different story.
A Gallup poll, published on Wednesday, showed what a devastating impact the eurozone’s crisis has had on popular attitudes to the European Union. Nor is the collapse of confidence in the EU limited purely to countries that have been required to slash wages and benefits in return for international financial aid. Read more
Judges of the German Constitutional Court (Matthias Hangst/Getty Images)
In the beginning, the eurozone crisis was a banking sector, private debt and government bond market emergency. Then economic recession, unemployment and welfare expenditure cuts took hold, propelling the growth of anti-EU, anti-establishment and anti-immigrant political movements. Now the eurozone crisis is acquiring a third dimension: one in which national constitutional courts are moving to centre stage.
True, the judges sitting on Germany’s constitutional court have been going in this direction since 2009, when they issued a judgement on the EU’s Lisbon treaty. But before the eurozone crisis erupted in full force, such rulings were fairly uncontroversial. The judges could reasonably argue in 2009 that they were simply testing if the new EU fundamental treaty was compatible with the democratic principles of Germany’s 1949 constitution, known as the Basic Law.
Now that the eurozone crisis has pushed the German government and the European Central Bank into once unimaginable measures to rescue the 17-nation currency bloc, the constitutional court has parked itself on wholly different territory. The judges would indignantly contest this, but when the court opened hearings in June into the legality of the ECB’s actions to protect the eurozone, it looked from the outside very much as if the judges had appointed themselves the supreme law lords of European integration – to the exclusion of any other EU or national legal authority. Read more
♦ The FT’s Martin Wolf asks whether the US is a functioning democracy.
♦ Charles Pierce at Esquire is already convinced that this was to be expected from “the worst Congress in the history of the Republic”.
♦ Russia is spending $755m on bolstering its military as part of Vladimir Putin’s plan to rebuild the country’s status as a credible diplomatic and military force.
♦ Silvio Berlusconi’s antics now do little to shock the bond markets – an indication that the eurozone crisis has moved decisively into a less aggressive phase, argues the FT’s Ralph Atkins.
♦ India’s Hindu temples are resisting requests from the central bank to declare their gold holdings amid mistrust of authorities trying to cut a hefty import bill.
♦ A new book on the birth of Bangladesh and the White House diplomacy of the time unearths conversations between Nixon and Kissinger that reveal their hateful attitudes towards Indians. Read more
For campaign issues that Germany’s political elite had all but agreed to shy away from, the eurozone debt crisis in general and Greece in particular are proving remarkably capable of generating unscripted campaign trail surprises. Read more
Portugal’s painful austerity programme runs into trouble
Pedro Passos Coelho, Portugal’s prime minister, is one of Europe’s staunchest backers of austerity. But his government’s painful two-year programme of structural adjustment has yet to deliver the results promised. And late last week, the country’s constitutional court issued a ruling that could fatally undermine his efforts to get the economy back on track.
What lies ahead for Cyprus and the eurozone?
After a failed bailout plan that involved taxing the deposits of small savers, Cyprus is now the epicentre of the eurozone crisis. Lawmakers are now seeking an alternative before Monday, when the European Central Bank will cut emergency liquidity to Cyprus’s foundering banks. Kerin Hope, Greece and Cyprus correspondent; Peter Spiegel, Brussels bureau chief; and Patrick Jenkins, banking editor, join Ben Hall to discuss what’s happened and what lies ahead.
Mario Monti exits a voting booth on February 24 (AFP/Getty)
Paul Krugman has got in early to comment on the political demise of Mario Monti – who now seems certain to trail in fourth in the Italian elections. According to Krugman, Monti’s reputation for wisdom is wildly overblown. On the contrary, he more or less deserves his fate because he was “in effect, the proconsul installed by Germany.”
Worse, according to Krugman, Monti’s policies did not even work. As in the rest of southern Europe, the economy has shrunk and so debt-to-GDP ratios have risen. There was only one “piece of good news” in the Monti era – that “bond markets have calmed down.” However, Monti cannot claim the credit even for this, because it is “largely thanks to the stated willingness of the ECB to step in and buy government debt when necessary.”
As ever, with Krugman, the argument is forcefully made. But it misses out a crucial stage in the argument and therefore unfairly denigrates the role of Monti in stabilising the Italian economy. Remember, when Monti came to power, the steady rise in the interest rates that Italy was having to pay to finance its debt was eating up more and more of the Italian budget. There was a real prospect that Italy might simply be unable to finance itself through the bond markets – and that might have sparked a terminal crisis in the euro. Read more