GlobalPost, September 11, 2012
BERLIN, Germany — As euro zone officials struggle to find a way out of the debt crisis, the fate of European Union unity on top of its common currency may come down to a decision by this country’s highest court.
The constitutional court’s eight red-robed judges are set to rule on Wednesday on a cornerstone of the effort to save the euro, the plan for a $630 billion permanent bailout fund called the European Stability Mechanism, or ESM.
Although most analysts predict the court will give the rescue fund a green light, a negative ruling could provoke panic on the markets and ultimately force the euro zone’s break up. Continue reading
Despite rising international pressure, Merkel refuses to allow the ECB to act as the lender of last resort
GlobalPost, Dec. 2, 2011
BERLIN, Germany — Over the past twenty-four hours, both French President Nicolas Sarkozy and German Chancellor Angela Merkel have delivered landmark speeches advocating deep changes to the euro zone to address the debt crisis. The changes, if agreed to by member nations, would impose real fiscal discipline over nations, with the goal of giving Brussels the power to prevent countries from falling into fiscal trouble.
The approach is a risky one. It asks countries to sacrifice national sovereignty in the name of economic stability, but in recent years citizens have signalled an unwillingness to forfeit more control to Brussels. But an even bigger problem is that it’s a long term approach to an urgent problem. If successful, it may prevent countries like Greece and Italy from ammassing huge debt burdens in the future. But it won’t solve the continent’s current crisis.
European nations need huge loans, and they need them fast or they risk defaulting. With the debt conflagration now blazing across borders, Merkel and Sarkozy are essentially gazing off at the horizon as the world urges Europe to deploy its most powerful option: unleashing its central bank to act as a lender of last resort.
The problem: Germany is resolutely opposed to using the ECB in this way. Merkel, appeared to reiterate her objections today, stating that “The European crisis will not be solved in one fell swoop.” Continue reading
The Sunday Business Post, April 10, 2011
The reaction in the political corridors of Berlin to the fact that Portugal has finally faced the music and asked for a bailout has been one of relief.
This is tinged with determination that this will be the last country to require a lifeline from its eurozone partners.
The German government, battered by a string of losses in key regional votes since the beginning of the year, is loath to be seen by the electorate as wasting yet more of taxpayers’ money on their profligate neighbours.
With just two years to go to federal elections, the ruling coalition of Chancellor Angela Merkel’s conservative Christian Democrats (CDU) and the pro-business Free Democrats (FDP) is fully aware that any further bailouts – of, say, Spain, Italy or Belgium- could spell electoral doom. Continue reading
As a group of international experts arrived in Dublin on Thursday, the Irish government finally seemed to admit that it was unable to cope with its massive banking crisis alone. Whether the talks result in a bailout from the EU-IMF rescue fund remains to be seen. But the Irish insist they are holding onto their low corporate tax.
Is a bailout by any other name still a bailout? The Irish government may have finally admitted that it requires help with its ailing banking sector but ministers are continuing to deny that the arrival of international financial experts to Dublin this week heralded any loss of national sovereignty. The mood in the country is now one of disbelief that Ireland, once the famed Celtic Tiger economic powerhouse, could have sunk so low, so quickly. And that it could be on the cusp of handing over some control of its governance to outsiders.
On Friday, members of the troika from the International Monetary Fund, the European Union and the European Central Bank, who held an initial round of talks on Thursday, began pouring over the books to get a sense of just what kind of assistance Ireland requires. The question now seems to be if a contingency fund for its banking sector will suffice or if the Irish state will have to apply for support from the European Financial Stability Facility, the fund financed by the EU and the IMF, which was created in response to the Greek debt crisis. Also at stake is whether Ireland will have to cede its low corporate tax rate, something that has long irked its European partners, before it can obtain any aid.
After a week of denials by government figures, by Thursday night Irish Finance Minister Brian Lenihan was admitting that the Irish government was no longer in a position to deal with the massive debts incurred by the country’s financial institutions that seemed to be sucking the rest of Ireland’s finances into a black hole. Continue reading
The Irish government insists it does not require a bailout, even as a team of EU and IMF experts heads to Dublin for talks. Yet aid could also come from another quarter, in the form of Ireland’s neighbor Britain. Meanwhile, the German press is divided on whether Berlin shares some of the blame for Ireland’s woes.
On Tuesday, embattled Irish Finance Minister Brian Lenihan fended off pressure from other euro-zone member states to seek a bailout package from the stability fund established by the European Union and the International Monetary Fund earlier this year. Yet Dublin may not be able to hold out for much longer.
The imminent arrival of IMF and EU experts in Dublin for what are being described as “short and focused discussions” starting on Thursday could see Ireland eventually tap into the fund, though on Tuesday night, following a meeting of euro-zone foreign ministers in Brussels, Lenihan was still insisting that such a bailout was “not inevitable.”
Speaking to public broadcaster RTE on Wednesday morning, Lenihan said Ireland would accept EU support if the banking crisis was too big for the country to fix on its own. “Ireland is a small country and if the banking problems in the country are too big for this small country to manage, Europe is making it clear that they will help and help in every possible way to secure the system,” Lenihan said. Continue reading