The EU/IMF assistance programs have already put Greece, Ireland and Portugal under much more intrusive international supervision, cramping their sovereignty in the name of ensuring that reform commitments are respected. The extra money for Greece is almost a gift and will never come back.”Įuro zone member states are already on the point of enacting much closer mutual fiscal surveillance, giving Brussels the power to review national budgets before they go to parliament. That is bound to heighten a eurosceptical backlash which is already vocal across northern Europe.Ĭonservative German economist Hans-Werner Sinn, head of the respected Ifo institute, said of the summit outcome: “The socialization of debt in Europe is merrily continuing. and this shall not happen according to my conviction,” she told a news conference.īut other European officials are convinced that the euro zone is moving toward some form of mutual debt guarantee and common debt issuance in the longer run. “A transfer union would be an automatic financial rebalancing. Merkel played down the implications of the Brussels deal, insisting on Friday that Europe should not become a union in which wealth is redistributed from richer to poorer states. The political need to show that banks and insurers were being made to pay trumped the financial logic, participants in the negotiations said. Private sector involvement was politically essential to secure parliamentary backing in Germany, the Netherlands and Finland, where public hostility to any further bailout is high, even though it will cost taxpayers more than it saves Greece. Many economists doubt whether the resulting reduction in Greece’s debt pile will be sufficient to avoid a hard restructuring at a later date. In return, Merkel scored a political victory by forcing her partners and a reluctant European Central Bank to accept that the private sector should share the burden of a second Greek bailout, at a high cost to the public purse.īanks and insurers will have to write down about 21 percent of the value of their holdings of Greek bonds. The German Chancellor accepted a leap forward which she had blocked in March, when a promised “comprehensive package” to solve the euro zone’s sovereign debt crisis was reduced to half-measures that failed to stop contagion spreading. “The EU summit was a historic victory for the French vision of EMU (Economic and Monetary Union)- meaning that it is now on course to turn into a fiscal/transfer union,” said analyst Brendan Bowen of Mitsubishi UFJ Securities International. They also made clear this was not the final stage in fiscal integration, with French President Nicolas Sarkozy promising new Franco-German proposals on economic governance by September. REUTERS/Tobias Schwarzīy giving their bailout fund new scope to help countries before they are shut out of credit markets, recapitalize banks and buy bonds in the secondary market, leaders of the 17-nation currency area laid the foundations of a European Monetary Fund.
German Chancellor Angela Merkel addresses the media during a news conference in Berlin July 22, 2011.
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