Friday, July 13, 2012
Catch-22: the craziness of saving the euro
July 13, 2012
According to an old Irish joke, a lost traveller approaches a pipe-smoking man leaning on a stile. “Can you tell me the way to Tipperary?” asks the traveller. The man contemplates the question, removes his pipe and replies: “Well, I wouldn’t start from here.”
One feels much the same about the eurozone crisis. As the drama pauses on account of Europe’s inviolable summer break, there is an emerging consensus on what a happy ending should look like. Encouragingly, elements of such a picture received attention at the EU’s June 29 summit in Brussels. Miracle of miracles, one or two of the best ideas – such as the direct recapitalisation of troubled banks by the EU’s rescue funds – made it into the eurozone’s “action needed” tray.
But to get from here to there is as devilishly complicated as ever. Nor is time necessarily on the side of the Europeans. The explanation lies partly in national economics and international finance. But underlying everything is what I think of as the “renationalisation” of politics since the crisis erupted in 2009. You only have to examine how domestic political struggles are playing out in the 17 eurozone nations to appreciate how difficult it will be for them to act in unison to protect the euro.