Monday, December 26, 2011

The euro crisis deepens

by Aditya Chakrabortty


December 26, 2011

Europe's leaders have spent most of the euro crisis denying there's a euro crisis. A "specific Greek problem", that they'd give you. Irish and Portuguese aberrations. As for the Spanish, that really was hard manchego. Wherever disaster struck over the past two years it was always the member's fault, never the club's.

The denialism ended this summer, as the financial bushfire moved to Italy and even began to menace Belgium and France. Sequestered in their conference rooms in northern Europe, policy-makers found it easy to wave away catastrophe in the distant, poorer periphery – but far harder when the second and third-largest economies in the entire bloc were under threat.

If the rhetoric and the not-so-faint snobbery have vanished, to be replaced by panic about "a last wakeup call" and "a crucial crossroads", the actual policy-making is as clueless as ever. At the last major summit, the one where David Cameron pressed the eject button, little was agreed apart from a restatement of Maastricht rules on budget deficits. Markets got excited about the promise of a $200bn loan to the IMF; until it transpired that the figure had been plucked out of thin air and no one knew where it would come from.


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