There have been five grand plans and many more incremental proposals. Heads of
seven eurozone governments have changed as a direct result of the debt
crisis – including the replacement of Italy’s Silvio Berlusconi and Greece’s
George Papandreou by the technocrats Mario Monti and Lucas Papademos. Yet
the tally of real achievements is deplorably small.
The European Financial Stability Facility was groomed as a €1tn rescue fund
for the euro. But its firepower and mandate remain on a tight leash.
Eurobonds remain a vague and controversial notion.
A voluntary debt swap between Greece and its private sector creditors is
elusive. The reluctant but inevitable push for fiscal union heads into
political opposition. True, banks are being pushed to recapitalise, but with
such lack of finesse that assets flood the market and lending has stalled.
It has been left to the European Central Bank to inject much-needed, but
temporary, liquidity.
Contagion marches on. Italy’s 10-year bond yield rose from less than 5 per
cent to more than 7 per cent during 2011. True, its borrowing cost fell
substantially at an auction on Wednesday. But that was for six-month money.
Doubts remain about Italy’s ability to fund itself for the longer term: it
has to finance €400bn of maturing debt in 2012.
Recession seems inevitable early next year. The eurozone’s economy grew by
only 0.2 per cent in the third quarter this year, with growth in France and
Germany offset by weaker peripheral economies. The recession will test
Portugal and Ireland’s ability to meet stringent targets set by their
bail-outs. And the truly ghastly thought is that there will be another EU
summit in January.
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