Euro Crisis Comment Roundup II
by Shane Fitzgerald
The euro crisis rumbled on ominously through the week though there was a diversion for EU nerds in the form of the annual State of the Union address, delivered by Commission President Barroso to the European Parliament on Wednesday. As well as reiterating the EU’s support for Greece and defending the role of the Commission and the EU’s ‘community method’, Barroso reaffirmed his organisation’s support for a financial transaction tax (FTT) as a way of clawing back some money from the wayward banking sector. He expanded on his remarks during an interview with the German daily Süddeutsche Zeitung on Friday, covered here by Spiegel online.
The FTT proposal has come in for a lot of flack, but also some cautious support from unlikely sources. Sony Kapoorcalled the plan unworkable at the level of 27, or even 17, member states, arguing that it should instead be targeted at the national level. Avinash Persaud was more positive and dismissed many of the criticisms levelled at the plan. Philippe Douste-Blazy sought to internationalise the cause and divert the proceeds to the world’s poor.
Although planned changes to the European Financial Stability Facility were approved in crucial parliamentary votes inFinland, Germany, Estonia and Austria, European stocks continued to slide. In one important piece of good news, European Parliament negotiators reached a deal with the Polish Presidency on the economic governance “six pack“. The final package won a plenary vote in the Parliament 354-269. More details of what made it into the final compromisehere.
In Ireland, we were reminded that today marks the third anniversary of the fateful decision by the last government to guarantee all deposits and creditors of Irish banks, a decision that looks set to cost the Irish taxpayer at least €50 billion. It was revealed that the current government now seeks to reduce those costs by taking advantage of new European plans to bolster troubled banks across the continent via a revamped rescue fund.
British Foreign Secretary strode into ‘I-told-you-so’ territory during an interview with The Spectator in which he again compared the Euro to “a burning building with no exit” and claimed that “it will be written about for centuries as a kind of historical monument to collective folly.”
On the international scene, Mike Dolan of Reuters warned of a crisis that is fast spreading to emerging markets andmade the case that we are all in the same boat now:
The withering complexity of a four-year-old global financial crisis — in the euro zone, United States or increasingly in China and across the faster-growing developing world — is now stretching the minds and patience of even the most clued-in experts and commentators.
…One of the reasons the fast-growing emerging markets look, for the second time in four years, set to succumb to the western financial crisis is that western banks — European banks in particular — provide them with so much finance.
…It’s not hard to prove these linkages everywhere and the scale is now astronomical. What’s harder to make sense of is how world leaders cannot seem to grasp that they and we are truly all in this together and going it alone is no longer a truly viable option without major unquantifiable upheavals.
Tyler Cowen was sceptical about plans to leverage the EFSF, while George Soros made another grand intervention, laying out three bold steps needed to stop a second Great Depression in The Financial Times. The Economist conjured black holes and warned us all to ‘Be Afraid’ as banking analysts got on with the task of sizing up the European recession of 2011/2012.
This article was first published by the Institute of International and European Affairs. Access the original here.