Veritas: Brussels stirs…to entrench divisions
European Commission leaders have at last moved to make more public their efforts to address the worsening crisis in the Eurozone. But the latest informal meeting, held to smooth the path to agreement at a summit later this month, has served only to entrench divisions further.
There was disagreement between France and Germany over the issuance of Eurobonds, with Chancellor Angela Merkel pointing out it would be contrary to European law. There was disagreement between Britain and new French president Francois Hollande over the proposed Financial Transactions Tax.
But the widest split was on how to deal with the outcome of the Greek election on June 17. The gamble by the newly popular Syriza party is that the EU will blink first, and bend the rules to allow Greece to remain within the bloc. German officials have now made it clear that they will not, while acknowledging the dire consequences of that decision.
So the meeting ended with more spin and bluff. Brussels continues to play the same old tunes, except louder: The President of the European Council, Herman Van Rompuy, said discussions were “focused and frank”, with broad agreement that for the single currency to survive, economic and monetary union needs to be taken to “a new stage”.
Jose Manuel Barroso, the head of the European Commission, stressed everyone wanted Greece to remain in the euro but warned: “We will stand by Greece while Greece stands by its commitments” to international lenders. That states the dilemma but does nothing to resolve it.
So the impasse continues, and the clock counts down. Markets set new lows for 2012 as EU officials suggested countries should start to prepare for a Greek exit. Yesterday, the FTSE 100 closed down 2.5% down at 5,266 points, its lowest finish so far in 2012, while the German Dax lost 2.3%, to finish at 6,285, and the French Cac 40 closed 2.62% down at 3,003.
The euro continues to sink (an ongoing benefit to German exporters). There are some indications that the European Central Bank may be intervening in a small way where possible, but no sign of the Big Bazooka. It is not even clear who is holding it, let alone if it is loaded and ready for action.
As one senior Chinese official remarked this week, the debt crisis in the Eurozone is manageable, but it is the management of the crisis that is truly a concern.