Winnipeg Free Press - PRINT EDITION

After quiet summer, big week ahead for fate of euro

  • Print

At least August was quiet.

Thanks to Mario Draghi, chief of the European Central Bank, euro-zone policy-makers got some badly needed R&R. His July promise to "do whatever it takes" to protect the euro from speculation was enough to persuade traders to pack their bags and head for the Riviera.

Now, though, the euro zone looks woefully behind in its mission to save the single currency. That is partly because a rescue is genuinely complicated, but it also is because too many people think that time is on their side.

At the moment sluggishness may seem like an odd accusation. The next month will contain a summer's worth of news. As The Economist went to press, Draghi was to carry through his pledge to limit the cost of medium-term borrowing by governments -- and hence by companies.

On Wednesday, Germany's senior court will rule on whether a euro-zone rescue fund is constitutional.

The same day the Dutch will vote and the European Commission will unveil its thoughts on a Europe-wide banking supervisor, a step toward a banking union.

Within weeks the troika that recently arrived in Athens will report back on whether to give Greece its next installment of rescue money, and all the while a restless succession of meetings will continue as leaders prepare for a big summit in October.

Measured against what needs to be done, however, this is inadequate. Even if the ECB successfully intervenes, the euro zone's politicians must ultimately determine the euro's fate. Although work on a banking union has begun, they are many months away from actually setting up one. Leaders increasingly recognize the dangers of excessive austerity, but they still routinely demand harsh budgets as a token of merit.

The debate about mutualizing some government debt has barely begun, and the vague German demand to shift political power to federal Brussels has hardly been broached in France.

Some euro-zone leaders think that is fine. With time, the reforms underway in the euro zone's troubled economies will bear fruit. If skeptical politicians and voters have a chance to contemplate the ruinous alternative of a euro breakup, they will warm to mutualization and federation, the same way they have put up with bigger transfers of money and sovereignty than ever seemed possible at the outset of the crisis two years ago. In the end, self-interest and good sense will win out.

In fact, however, time may be working against the euro. Uncertainty and austerity are deepening Europe's economic plight. The euro zone looks to be back in recession. Unemployment is at a record high. Surveys of consumers and business activity make dismal reading, and the malaise has spread to Germany.

Prolonged economic stagnation will make it more expensive to keep the euro together and will poison the politics of a rescue.

Any of this week's events could throw up another barrier. A German court ruling against the bailout fund would be the most dramatic. The Dutch vote could further tie the hands of that nation's politicians, however, and the banking-union talks could spark a fight over regulation.

Far from bringing countries together, the crisis is tugging them apart.

To stop the rot, France and Germany -- still at the heart of Europe -- need to settle on a rescue and prepare their parties and their peoples to accept it. Nothing will happen without that.

It means grappling with the sort of federalism that statist France always has rejected. It means Germany accepting some debt mutualization. Nobody said that this would be easy.

If Chancellor Angela Merkel and President Francois Hollande simply wait for time to do their job for them, however, they will lose control of their fate.

Republished from the Winnipeg Free Press print edition September 10, 2012 A11

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes


  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.


Make text: Larger | Smaller


Selinger addresses stadium lawsuit

View more like this

Photo Store Gallery

  • Geese take cover in long grass in the Tuxedo Business Park near Route 90 Wednesday- Day 28– June 27, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • Geese fight as a male defends his nesting site at the duck pond at St Vital Park Thursday morning- See Bryksa’s Goose a Day Photo- Day 08- May 10, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos


Are you concerned about the number of homicides so far this year?

View Results

Ads by Google