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Euro fights for its life
Only 12 years after it was launched to great fanfare and early success, the euro is locked in mortal combat
* By Ian Traynor, Guardian News & Media Ltd
* Published: 00:00 December 20, 2010
Only 12 years after it was launched to great fanfare and after early success, the euro is fighting for its short life. Two of the 16 countries using the currency have had to be bailed out, despite the ban on such rescues in 1992's Maastricht treaty that created Europe's monetary union.
Following the traumas of Greece and Ireland, Portugal may be next in line. There are worries about Spain.
In Brussels, the leaders of 27 countries, as well as the heads of the European commission and the European Central Bank, gather for their seventh EU summit this year, all consumed by the crisis surrounding the single currency.
The air of rancour and pessimism is pervasive. Bitterness is widespread, particularly among the smaller EU countries and those who feel they are being bullied by the most powerful.
"There is no appetite anywhere for another Franco-German plan to save the euro," said an east European government minister.
Taking fright
Jean Asselborn, the foreign minister of Luxembourg, went further: "I can only warn Germany and France against a claim to power that shows a certain overbearingness and arrogance."
A prime minister of a small EU state was more damning still. "Merkel and Sarkozy think they are the most pro-European leaders ever. But there is no Franco-German leadership. It's all domestic politics," he told the Guardian.
Rosy days
The widespread unhappiness, particularly with Germany and the nostalgia there for the rosy days of the D-mark, highlight the tensions gripping Europe as a result of the euro's year of agony.
The crisis a delayed impact from the banking and financial collapse of 2008 crept up and took EU leaders unawares, starting in the Greek government's confession late last year that its predecessor had been cooking the books for years and that its public debt and budget deficit were careering out of control.
The bond markets took fright, pushing up the risk premiums on Greek borrowing to exorbitant levels and triggering a spiral of panic and brinkmanship that engulfed Ireland and Portugal and exposed the flimsy foundations of the common currency.
The year opened as it ends, with a Brussels summit characterised by misunderstanding and fundamental differences over what to do. "It's hard to see in policy terms what is the way forward," said a senior diplomat in Brussels.
In February, EU leaders promised to do whatever it would take to help Greece and protect the euro. The markets attacked harder and called their bluff. In March, for the first time, Angela Merkel, the German chancellor, dictated the stiff terms that would have to be met for Berlin to accede to a Greek bailout.
The German backlash was severe, with the media denouncing Greek spongers and feckless southern Europeans while attacking Merkel for betraying the principles supposed to underpin the euro. In May the EU and the IMF bailed out Greece to the tune of €110 billion and announced a €750 billion shield to protect the euro against a cascade of sovereign insolvencies around the Mediterranean.
That brought a respite, but only for a while. By last month Ireland, riddled with rotten banks and crony capitalism, was the first country to tap the emergency fund for €85 billion.
"Was it for this?" asked the Irish Times plaintively, evoking the poetry of WB Yeats from 1913 to grieve over the surrender of Irish sovereignty to a bunch of IMF and ECB accountants.
Tomorrow's summit caps a year of unprecedented trouble, with the leaders expected to agree on a new permanent European stability mechanism replacing May's ad hoc emergency fund from 2013.
But the EU's leaders are gambling, crossing their fingers and praying for good fortune. No one knows if the gamble will pay off.
The script for the summit has been written in Berlin, indicating how the crisis has thrust Germany to the fore in Europe in a way unparalleled since the country was reunified 20 years ago. For many other Europeans, this experience has been chastening.
"It has always been very difficult to take decisions in the EU against German thinking. But that's not new," said the prime minister. "The new phenomenon is that the Germans are talking, but they're not listening. For the first time on a serious issue, I'm upset by the German behaviour."
"Of course, the southern countries have got big problems and they've had it too easy for the past 10 years. But you can't kick them out," he said. "It's not nice that we Germans have to pay, but we have to see that Europe gives us something back.
If they brought back the Deutsche Mark and the franc and all the rest, it would be the end of Europe. Everyone would be a loser."
* €110b: EU and the IMF bailout of Greece
* €162b: the portion of European bailout funds for which Berlin will be liable
* €580b: pledged in bailout funds by Europe since May
* €85b: emergency funds tapped by Ireland
Only 12 years after it was launched to great fanfare and early success, the euro is locked in mortal combat
* By Ian Traynor, Guardian News & Media Ltd
* Published: 00:00 December 20, 2010
Only 12 years after it was launched to great fanfare and after early success, the euro is fighting for its short life. Two of the 16 countries using the currency have had to be bailed out, despite the ban on such rescues in 1992's Maastricht treaty that created Europe's monetary union.
Following the traumas of Greece and Ireland, Portugal may be next in line. There are worries about Spain.
In Brussels, the leaders of 27 countries, as well as the heads of the European commission and the European Central Bank, gather for their seventh EU summit this year, all consumed by the crisis surrounding the single currency.
The air of rancour and pessimism is pervasive. Bitterness is widespread, particularly among the smaller EU countries and those who feel they are being bullied by the most powerful.
"There is no appetite anywhere for another Franco-German plan to save the euro," said an east European government minister.
Taking fright
Jean Asselborn, the foreign minister of Luxembourg, went further: "I can only warn Germany and France against a claim to power that shows a certain overbearingness and arrogance."
A prime minister of a small EU state was more damning still. "Merkel and Sarkozy think they are the most pro-European leaders ever. But there is no Franco-German leadership. It's all domestic politics," he told the Guardian.
Rosy days
The widespread unhappiness, particularly with Germany and the nostalgia there for the rosy days of the D-mark, highlight the tensions gripping Europe as a result of the euro's year of agony.
The crisis a delayed impact from the banking and financial collapse of 2008 crept up and took EU leaders unawares, starting in the Greek government's confession late last year that its predecessor had been cooking the books for years and that its public debt and budget deficit were careering out of control.
The bond markets took fright, pushing up the risk premiums on Greek borrowing to exorbitant levels and triggering a spiral of panic and brinkmanship that engulfed Ireland and Portugal and exposed the flimsy foundations of the common currency.
The year opened as it ends, with a Brussels summit characterised by misunderstanding and fundamental differences over what to do. "It's hard to see in policy terms what is the way forward," said a senior diplomat in Brussels.
In February, EU leaders promised to do whatever it would take to help Greece and protect the euro. The markets attacked harder and called their bluff. In March, for the first time, Angela Merkel, the German chancellor, dictated the stiff terms that would have to be met for Berlin to accede to a Greek bailout.
The German backlash was severe, with the media denouncing Greek spongers and feckless southern Europeans while attacking Merkel for betraying the principles supposed to underpin the euro. In May the EU and the IMF bailed out Greece to the tune of €110 billion and announced a €750 billion shield to protect the euro against a cascade of sovereign insolvencies around the Mediterranean.
That brought a respite, but only for a while. By last month Ireland, riddled with rotten banks and crony capitalism, was the first country to tap the emergency fund for €85 billion.
"Was it for this?" asked the Irish Times plaintively, evoking the poetry of WB Yeats from 1913 to grieve over the surrender of Irish sovereignty to a bunch of IMF and ECB accountants.
Tomorrow's summit caps a year of unprecedented trouble, with the leaders expected to agree on a new permanent European stability mechanism replacing May's ad hoc emergency fund from 2013.
But the EU's leaders are gambling, crossing their fingers and praying for good fortune. No one knows if the gamble will pay off.
The script for the summit has been written in Berlin, indicating how the crisis has thrust Germany to the fore in Europe in a way unparalleled since the country was reunified 20 years ago. For many other Europeans, this experience has been chastening.
"It has always been very difficult to take decisions in the EU against German thinking. But that's not new," said the prime minister. "The new phenomenon is that the Germans are talking, but they're not listening. For the first time on a serious issue, I'm upset by the German behaviour."
"Of course, the southern countries have got big problems and they've had it too easy for the past 10 years. But you can't kick them out," he said. "It's not nice that we Germans have to pay, but we have to see that Europe gives us something back.
If they brought back the Deutsche Mark and the franc and all the rest, it would be the end of Europe. Everyone would be a loser."
* €110b: EU and the IMF bailout of Greece
* €162b: the portion of European bailout funds for which Berlin will be liable
* €580b: pledged in bailout funds by Europe since May
* €85b: emergency funds tapped by Ireland
