EU finance ministers at odds in Wrocław

The meeting of the EU’s finance ministers and central bank bosses in the Polish city of Wrocław ended on Saturday. Discord reigned over whether to tax financial transactions, and the decision to pay the next bailout instalment to Greece was postponed. While some commentators say the participants’ indecisiveness is highly dangerous, others see some positive signs, particularly from Germany.

Europe’s explosive undecisiveness

US Treasury Secretary Timothy Geithner will no doubt have been shocked to see so much indecisiveness among his colleagues at the meeting of EU finance ministers, writes Jean Quatremer in his blog Coulisses de Bruxelles:

“It makes the Americans nervous to see the Europeans playing with matches next to a powder keg. The common currency seems to be in more danger than ever, but not only are the 17 Euro states unable to find a solution that would calm the markets once and for all, they also squabble in public about things they’ve already agreed on, which only exacerbates investors’ panic.

… Ultimately the only thing that could prevent the markets from speculating against the debts of a certain country is the establishment of a common European treasury and the issuance of euro bonds . But that would mean a huge increase in federalism, something the states are clearly not yet ready for.” (Blog Coulisses de Bruxelles – France | 19/09/2011)

Germany’s euro policy becoming clearer

After the meeting in Wroclaw the business paper Cinco Días says it can discern a refreshing change in the German stance:

“A certain order now seems to be emerging from the apparent chaos. In recent weeks the German authorities have started to seem more amenable to finding long-term solutions to the monetary union’s crisis. For the time being Berlin continues to insist that the debt-ridden peripheral states exercise tight control over their budgets. Regarding the future Merkel and others have clearly signalled that they are open to discussion without taboos. Germany’s partners should do everything they can to support this new and refreshing attitude. At the beginning of the Eurozone finance ministers’ meeting Angela Merkel reiterated her opposition to eurobonds, which have often been hailed as a panacea. But listen closely and you’ll detect a clear change in Berlin’s tone. Significantly, the German politicians have started talking about the phase after the crisis.” (Cinco Días – Spain | 19/09/2011)

Greece facing threat of civil war

The Greek Minister of Finance Evangelos Venizelos reiterated the Greek government’s resolve to implement further spending cuts at the EU finance ministers’ meeting in Poland. But such measures could plunge Greece’s society into chaos and violence, fears the conservative daily Kathimerini: “The Eurozone is not a reality show where members can expel the weakest link by driving it into an economic Armageddon. If our sick economy is forced to implement further measures this will undoubtedly lead to a social explosion.

… The Greek people are making great efforts and many sacrifices, unlike the government, which is swimming in an ocean of lies.

… The danger is so great that the EU and the International Monetary Fund are withdrawing their support for this pseudo-government, and chaos will inevitably ensue.

… The political and social stability is already disappearing. At the next demonstration all it will take is one rubber bullet to set off a full-scale civil war.” (Kathimerini – Greece | 18/09/2011)

Rescue fund has its shortcomings

The president of Germany’s Bundesbank, Jens Weidmann, criticised the ECB’s use of monetary policy measures to finance sovereign debt after the meeting in Poland came to an end. Clearly not enough thought has been put into planning the EFSF rescue fund, the conservative daily Frankfurter Allgemeine Zeitung concludes: “In future the fund is not just to provide loans to preserve debt-stricken countries from going bankrupt, it is also to be used to recapitalise the banks. Consequently there are growing doubts about whether the fund can also continue to play the role of resident bond-buyer. Those now considering allowing the EFSF to cover ‘only’ the risks involved in buying up bonds continue to need the ECB to buy bonds. So the latter would effectively continue to finance states through monetary policy. In this case the demands for an extension of the EFSF would not be long in coming. The debate would be reopened. The one side would demand more money for the fund while the other would crank up the pressure on the ECB, all for the sake of saving the euro.” (Frankfurter Allgemeine Zeitung – Germany | 19/09/2011)

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