Eurocrash: euro saved – the end
Thursday 27 September 2012
The riot in Madrid, strikers in Athens – the 26th general strike since the crisis erupted - and falling prices in Frankfurt (as well as London and Paris - ed) all may indicate that the Cassandras are on the up, the paper says. But they are wrong. The ECB and ESM provide security, the crisis countries are making progress in their reforms. And the euro survives.
It is now clear, we are told, that September was the month of decisions. The ECB's decision to buy "unlimited" bonds from crisis countries will go down in history; likewise, the trend-setting decision by the Federal Constitutional Court on the ESM bailout.
Both had their effect: it is quieter in the eurozone, even if the fires have not been extinguished all at once. Interest rates on Spanish bonds have risen sharply, Greece struggles for billions more in aid, Portugal's government has been forced to rescind pay cuts and Spain refuses to ask for a bailout.
That, says the paper, sounds as if nothing has changed. But, it says, there is one big difference: the fundamental doubts about the preservation of the euro have been removed. This change in mood is due to ECB chief Mario Draghi. With his announcement on "unlimited" bond purchases, he has made it clear that the euro will survive.
Supporting this line is Nicolaus Heinen, Europe expert at Deutsche Bank Research. "There is now a very reliable firewall", he says. "Thus, the existential crisis has been overcome and the preservation of euro has been secured for the time".
Professor Clemens Fuest offers a similar judgement. In a study for the Bavarian Business Association (VBW), he believes there will be "a persistent economic stagnation in southern Europe". The ECB intervention risks weakening the currency, but there will be no collapse of the eurozone. He expects all member states to remain in the eurozone.
As to the future, Draghi's announcement has bought Europe time, says Heinen, giving the politicians the opportunity to introduce institutional reform. "Either it is possible to create a banking and fiscal union - a framework that prevents future crises – or we are threatened with permanent muddling through at the expense of economic growth".
Heinen believes it is unrealistic to assume that the crisis countries will carry out their reforms immediately. What matters is that the direction is clear, adding: "Investors want to know where the euro zone should be in five years".
However, if that narrative doesn't suit you, you can go with Torsten Riecke in the same newspaper. He says that the ECB's promises and all the talk of politics have not changed anything. The eurozone rescue "was only a summer dream", he says. The crisis is still there and now the short summer fairytale is ending.
It's back, says Riecke, firstly because it had never really gone, and secondly, because chancellor Merkel and her finance minister Schäuble are making it a self-fulfilling prophecy.
So we have it. The crisis is over, and the crisis is just about to start all over again. And that's as accurate a prediction as you will get - or perhaps not.
Riecke thinks he has identified the German dilemma. They are, he says, partners of an unconditional euro bailout they cannot refuse but no longer want. That's why Merkel supports Draghi's "bazooka" policy. That's why she agreed to the plans for a Union Bank in late June. But behind that, the chancellor and her finance minister are sure there will never be a majority to see them through.
And yet, the riots go on and the anger mounts. The non-crisis continues.
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Richard North 27/09/2012
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