Monday, July 25, 2011

Europe Takes Step Closer to Economic Government

July 25, 2011

With the new aid package for Greece, Europe's leaders have not ended the battle for the euro, but they have given Athens time. The new bailout also takes the euro zone a step closer to having an economic government. By SPIEGEL Staff.

When French President Nicolas Sarkozy wants to present something as a personal victory to the press, he likes to stand at the lectern, strike a pose and deliver a carefully worded statement. When he did so last Thursday, he was celebrating himself and, as he put it, the "beginnings of a European monetary fund." Sarkozy was the one who was responsible for this initiative.

German Chancellor Angela Merkel's approach to selling a success is a bit different. On Thursday, she held a piece of paper in her hands, looked at it, waved it back and forth a little. "If you want to take another look at this, I will leave it up to you to study it carefully," she said. "Various things are included, such as an exchange of bonds, for example." The listener hardly noticed that she was really talking about an involvement by banks and insurance companies in the Greek bailout. That was the part that Merkel had managed to push through.

The two press conferences were held last Thursday in Brussels after the leaders of the euro-zone countries had agreed on a new aid package for Greece. It was a joint German-French effort. Both sides had to make some concessions, but each side also managed to achieve part of its aims. Both contributed to the success of the summit. But when it was over, Sarkozy was the only one who came across as having rescued the euro.

Merkel simply isn't good at posing. During a press conference in Berlin the next day, she spoke of her "passion for Europe," a special form of passion that she believes is "quite intense." But that is debatable. Once again, Merkel failed to come up with something powerful to say for Europe. But at least she did contribute, at the technical level, to Europe's moving in the right direction, namely, toward a stronger integration of its economies.

But it is still too early to celebrate. Although the euro-zone leaders were able to buy time with their decisions, and were able to depart for their summer vacations feeling at least partly reassured, neither Greece nor the euro have been definitely rescued yet.

Ansgar Belke, an economics professor from the western German city of Essen, remains skeptical. "The resolutions (at the summit) will not put an end to the debt crisis. In fact, the risk of contagion spreading to other countries is only likely to grow," says Belke, noting that an "additional, even more substantial debt restructuring will be necessary" in the future. According to Belke, Greece is "still not on a sustainable path."


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