Thursday, December 29, 2011

EU epitaph?

The headline of what the Wall Street Journal bills as an insider narrative of the escalating European debt crisis is "Dithering at The top Turned EU Crisis into Global Threat."  I'm not sure dithering is quite right. The story suggests that European leaders couldn't agree not because they were indecisive per se but because their national interests were at odds and each was answerable to his or her own people. At one moment, French President Nicholas Sarkozy expressed the problem succinctly:
Finnish premier Jyrki Katainen also complained. His parliament wanted collateral in exchange for more Finnish lending to Greece. "No collateral, no agreement from me," he said.

Mr. Sarkozy was peeved. "All our parliaments can cause problems," he said.
The discord was spread broadly:
Then it was Slovakia's turn. Prime Minister Iveta Radičová was fighting to keep her coalition together over aid for Greece—a richer country than her own. Adding more powers to the bailout fund "would be suicide," she said.
Among the bigger players, Germany's Chancellor Merkel and Finance Minister Schäuble would/could not put German taxpayers on the hook for a full Greek bailout without asking holders of Greek debt to take a haircut.  French ECB President Trichet could not countenance a haircut that might put render French banks, which hold a lot of Greek debt, into insolvency.  As one leader quoted in the FT confessed just before the December summit, leaders couldn't figure out how to do the necessary and get re-elected.   It's been a failure not of individual will but of insufficiently married fortunes.

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