JUST 15 days ago European prime ministers and presidents held an emergency meeting in Brussels. Their objective: to deal definitively with Greece’s debt problems; and to ringfence other vulnerable economies from contagion, most notably Spain and Italy. But as soon as details of the agreement emerged it was clear that measures aimed at achieving the second contagion-halting objective were too few and too weak. It was less clear that their inadequacy would be revealed as rapidly as it has been.
Confidence in the two big Mediterranean economies is fading fast. They are exhibiting all the signs that Ireland suffered in September and October last year as this State came gradually to be shut out of the bond market. Yesterday, Spain did manage to find takers for new debt but was obliged to offer them an interest rate almost a full percentage point higher than the last time it sold similar bonds just a few weeks earlier. Later it announced the cancellation of an auction later this month. Further echoes of Ireland’s experience last year. Italy’s situation is more serious still. Its outstanding debt is three times that of Spain’s, making its refinancing needs much greater. Indeed, so enormous are those needs that even if the stronger euro area countries wished to help directly, they may not have the wherewithal to do so.
Yesterday, European Commission president Jose Barroso bravely urged euro zone leaders to revisit the package of a fortnight ago. Specifically, he advocated the expansion of the bailout fund from which Ireland, Greece and Portugal are given money to keep their respective states ticking over. But Mr Barroso’s limited influence was immediately evident when both Germany and the Netherlands rejected the call.
Germany’s reluctance to adopt the sort of radical measures that might address the euro’s existential crisis was also in evidence yesterday in Frankfurt. At his monthly press conference European Central Bank president Jean Claude Trichet said his institution had resumed its bond-buying programme after a four-month hiatus. But the decision to do so was not unanimous. Germany’s central bank, also headquartered in Frankfurt, let it be known it was among the dissenting minority.
Ireland’s interests lie in a strengthening of European integration. The nature of the challenges facing Europe and the world today show co-operation is needed now more than ever. Although European leaders have repeatedly stated they will do whatever is necessary to guarantee the future of the euro, their actions have not matched their words. Almost always the response has been to do as little as possible and hope for the best.
This can continue no longer, not least because it is conceivable that the crisis could deepen to a point where no intervention, no matter how radical, would be capable of restoring calm. Time is running out. Prevarication and half measures must be replaced by decisiveness and radicalism.