European politics
The euro crisis
Death of a summit
Oct 20th 2011, 23:00
THE big blanks left in the draft of the euro summit communiqué that was doing the rounds on October 20th said it all. (PDF is here)
Amid the self-congratulatory verbiage about how the euro zone had taken “unprecedented steps to combat the effects of the worldwide financial crisis”, the document was silent on all the most important elements of the much-promised “comprehensive solution” to the euro's debt crisis: how to strengthen monitoring of Greece's derailing adjustment programme; how much of a haircut to impose on private holders of Greek debt; how to boost the power of the bail-out fund to protect Spain and Italy; and how to recapitalise Europe's most fragile banks.
These voids were due to be filled in a weekend marathon of meetings in Brussels. Finance ministers would gather on October 21st and 22nd. Then the leaders would hold twin summits on October 23rd, first of all the European Union's 27 members, followed by a gathering of the 17 leaders of the euro zone. At the end of it all there would be, as Nicolas Sarkozy and Angela Merkel promised in Berlin a fortnight earlier, a “global package” that would prove to the world that the euro zone could deal with its problems.
“You should know that France and Germany have perfectly common positions on all the issues,” Mr Sarkozy had declared at the time, comically refusing to give any detail of what that the accord consisted of. (Transcript here, in French)
The disagreement between the French president and the German chancellor became ever more apparent as the days went by. Mrs Merkel started to play down the prospect of a comprehensive resolution of the crisis, saying there would be no magic wand. A rushed visit by Mr Sarkozy to Frankfurt to meet Mrs Merkel and other key figures, apparently leaving his wife, Carla Bruni, to give birth to their baby daughter on her own, does not seem to have unblocked the positions.
On October 20th, the climate of discord seemed to grip even the troika of technical experts assessing the Greek programme. Reports emerged of disagreement between the IMF and the European Commission over their estimates of Greece's ability to bring down its debt; the IMF thinks the commission is being too optimistic. A draft of the troika's report (PDF is here) spoke of the country's debt dynamics being “extremely worrying”. But the key section in the report setting out the figures was left blank.
Reports started circulating of the Franco-German disagreement being so bad that the summit might have to be delayed. This was quickly denied. But asked whether there might have to be an additional summit next week, a senior EU official said vaguely: “Is there life after death?”
Yes there is, at least when it comes to euro-zone summits. As the summit of October 23rd gives up the ghost, another one is already being born. A statement (Word file is here), from the Elysée Palace said the French and German leaders were determined to draw up “a global and ambitious solution” to the crisis. After a “deep examination” of the issues on the 23rd, the statement said, there would be a new summit to be held by October 26th, at the latest.
The charitable view of the mess is that Mrs Merkel needs time to consult the Bundestag on changes to the bail-out fund. Moreover, given the poor state of Greece's reform programme, more time is needed to negotiate with Greece's private sector a greater reduction of its debt than agreed in July. The cynical view is that there is a perfect disagreement between Paris and Berlin. Details of the latest state of play are summed up here. In short, the summit to resolve the crisis is, itself, in crisis.
Correction: This blog post briefly, and mistakenly, referred to "London" rather than "Berlin" in the last paragraph.
In this blog, our Charlemagne columnist considers the ideas and events that shape Europe, while dealing with the quirks of life in the Euro-bubble. An archive of print columns can be found here.
Advertisement
- Analects | China
- Americas view | The Americas
- Babbage | Science and technology
- Bagehot's notebook | British politics
- Banyan | Asia
- Baobab | Africa
- Blighty | Britain
- Buttonwood's notebook | Financial markets
- Charlemagne's notebook | European politics
- Clausewitz | Defence, security and diplomacy
- Democracy in America | American politics
- Eastern approaches | Ex-communist Europe
- Elysée | France’s presidential election
- Free exchange | Economics
- Game theory | Sports
- Graphic detail | Charts, maps and infographics
- Gulliver | Business travel
- Johnson | Language
- Leviathan | Public policy
- Lexington's notebook | American politics
- Newsbook | News analysis
- Prospero | Books, arts and culture
- Schumpeter | Business and management
Most commented
- The euro crisis: The Greek run
- Foreigners in China: Barbarians at the gate, again
- Brazil’s economy: A bull diminished
- Russia and NATO: Rethink the reset
- Gay marriage: North Carolina begs the question too
- Nationalism online: Backfired
- Greece and the euro: Exodus, chapter 1
- Turkey’s cultural ambitions: Of marbles and men
- Economics and culture: Maybe teen motherhood isn't so bad
- Renouncing citizenship: Did Eduardo Saverin do anything wrong?
Over the past five days
Most recommended
- The euro crisis: The Greek run
- Renouncing citizenship: Did Eduardo Saverin do anything wrong?
- Greek politics: Slouching towards the drachma
- Brazil’s economy: A bull diminished
- The euro crisis: Going, going, gone?
- Foreigners in China: Barbarians at the gate, again
- Jacob Zuma: Portrait of a president
- Rival versions of capitalism: The endangered public company
- Bo Xilai v Chen Guangcheng: Who is the mightier?
- Facebook goes public: Not top of the pops
Over the past seven days
Advertisement
Readers' comments
The Economist welcomes your views. Please stay on topic and be respectful of other readers. Review our comments policy.
Sort:
Has anyone read the Economist article "holding together: a special report on the euro area" Can they tell me whats it about and the main points of it? Whats the message? I am totally confused!!!
Has anyone read the Economist article "holding together: a special report on the euro area" Can they tell me whats it about and the main points of it? Whats the message? I am totally confused!!!
The PIGS still breathe but they must be declared economically dead. Unplug the respirator, and let them rest in peace (in their own hell). To put money over money seldom has been business wise. And they have been granted much more than reasonable monetary patience.
With Greece in focus:
Greece has 11 milj inhabitants.
Labour force 5 million.
Labour force by occupation:
agriculture: 12%
industry: 22%
services: 65%.
The service sector contributes 78 % of GDP
industry 18%
agriculture 3%
The public sector accounts for about 40% of total economic output.
The GDP approx. € 240 billion.
State Revenues €90 billion
State Expenses €115 billion.
Greece Exports €16 billion.
Greece Imports €48 billion.
How to live comfortable from this, you Greeks explain this.
Gross external debt (30 June 2010) approx. € 413 billion.
Public debt €355 billion (160% of GDP).
Foreign reserves € 5,5 billion.
EURO-zone countries have to give Greece at least € 440 billion until 2020.
¤ Which country lied the most to enter into the EURO-zone, if not Greece.
¤ Which Euro-zone country artificially reduced their reported budget deficits the most, if not Greece.
¤ Which EURO-zone country has promised most and done least to solve their budget-crise, if not Greece.
Counting all debts in 2020 than each and every Greek can lean back and enjoy having received more than € 70.000:-- from us working in the EURO-zone. (Am I right ??)
Is this really what we in the EURO-zone want ?
You Greeks, continue not to pay your taxes, continue to be corrupt, continue to have nepotism, continue to scream and strike and destroy your own country, take your coffee break in the sun, look over the Mediterranean and laugh, laugh, laugh at us idiots who are working for your good life.
MrPierre
Stop bailing out these countries! The more we bail them the more these countries will depend on it and become a lazy society! Instead of bailing, our politicians should advise Greece how to stand on their own feet and face their economic challenges. Greece should find solutions to boost their economy by increasing exports and innovation. Promote higher education, adapt basic life style and show willingness to work double shifts. This will get you out of the mess.
@PLAID KEE.Oh lalalala,bum!The LARGEST AND POWERFUL countries like France!Sir,i have bad news.NAPOLEON IS DEAD.
The French & Germans face the dilemma of defusing the Euro crisis by either the motto
a) One for All & All for One
or
b) To the Strongest - Winner takes all.
Grandpa Wen gentely told the EU to "Get the house in order." It may be time for the Germany + BRICS countries to step up on the plate to help as basically the rest of the world are drowned up to their necks in debt.
This solution should mean that all the private Banksters to all get a haircut and write off the the PIGS debts. Whatever is needed to recapitalise their banks is then the responsibilities of their own governments.
Then the Germany + BRICS would help the PIGS to grow out of the debt problem into a more sustainable economic growth path.
The leaders of these countries desperately need to realize that they need to step in and help the EU, putting aside their disagreements. Wasting time and avoiding the situation will help no one, and France and Germany need to work together to at least try and fix the European economy.
How to end the crisis would be challenge by all of the Leaders. G8, G20, APEC, and any others Summit routine recipe agenda.
How could the members of the, "euro-zone," hold a meeting and then not talk about the most important topics? They promised some sort of resolution, but then did not reveal upon which issues they were going to discuss? I think this issue is too big and has already gotten to out of hand for Sarkozy and Merkel to still be discussing what action should be taken, action needs to happen, even if that means getting help from other, "non-euro," countries. If France and Germany cannot come to an agreement now, when will they ever without help, things are already almost as bad as they could be.
By now, the problem is too large for one country to solve. It seems that the UN will have to step in and suspend the sovereignties of some state and allow IMF to take over running the economic affairs and stripping their assets to pay back to those barbarian creditors until they are satiated.
This ongoing crisis will never be resolved until someone steps up to take charge and take responsibility, even if they weren't the people who started it. That seems farfetched to wish. Nobody is going to fess up and face up to the crisis. Germany and France need to keep a strong alliance, as they normally do in times of disaster. Sarkozy provides evidence for his bondage with Germany's leader, Merkel, when he says,"You should know that France and Germany have perfectly common positions on all the issues." They may be going through a rough patch, but if a leader notices their common viewpoints, then chances are they are going to turn out just fine. Implantation and agreements need to be made by both France and Germany before the eurozone has any chance of improving.
EU is an institution that has been designed to prevent future wars among states. It is increasingly looking obvious to many that it will not be able to fulfill that function.
It is too late to save everybody in the Euro. Finally the Germans got their ways over the French wishes and the Banking zombies got some of the hair-cuts they deserved and that are sorely needed to please the investors. But now many of the zombie attendant insurers are left shivering in cold. The Euro crisis is not running out of steam yet.
When the French & Germans nearly came to fist blows to protect their banking interests, it is time for the Squids to move in and take down the global markets.
The EU's motto seems to be: "We don't know where we are going but the faster we drive the sooner we will get there!"
http://klauskastner.blogspot.com/2011/10/eu-we-dont-know-where-we-are-go...
@cmryan514
". . . and now the UK is considering leaving the EU. What the heck is going on?"
This would only be consequent.
Yes, the significance of a referendum (promised by the Conservatives) on the Lisbon Treaty was over after it was signed by all 27 members of the EU, but Cameron also promised his electorate afterward, Nov 2009: "Never again should it be possible for a British government to transfer power to the European Union without the say of the British people in a referendum."
This time has come now, if the planned fiscal consolidation and fiscal institutional reforms become mandatory EU-wide.
Cameron should simply hold the promised referendum and leave the EU if this is the will of a British majority - instead of blocking those who need these reforms to abate the Euro crisis.
This whole situation is a complete and utter mess. While France and Germany's ties have not been strong for a while over this economic crisis, they need to find a way to get it together and compromise. Meanwhile, countries like Greece and Italy and continuously falling and nobody is there to back them up. Also, I have heard that Sarkozy has told UK's Cameron to 'shut up' over this whole situation, and now the UK is considering leaving the EU. What the heck is going on? This is a time for unity and compromise, not a time for Europe to not only fall apart economically, but also as a world power. Come on guys, get it together!
The largest, most powerful countries will always be the ones making the decisions for the smaller countries in groups; this is why it is not surprise that France and Germany are the head honchos leading the euro zone meetings. Just like the UN Security Council has 5 countries making huge decisions for the rest of the world, it is the norm that France and Germany should be making the fair share of decisions for the EU.