Thursday, September 8, 2011

EU Fiscal Union Is Highly Unlikely, con

. Thursday, September 8, 2011

Edward Hugh reports that the Germans are laying down the gauntlet on the Greeks:

Only yesterday, German Finance Minsister Wolfgang Schaeuble informed members of the parliamentary budget committee that Greece is now perched on a "knife's edge". This follows hints from other leading German politicians (including Angela Merkel herself) that a Greek euro exit is no longer the unthinkable taboo topic which it had been to date.  
As if all of this wasn't clear enough, the Dutch Prime Minister Mark Rutte suggested yesterday in an FT article that expulsion from the Euro Area should be available as a disciplinary measure of last resort.
For detail on why things are coming to head now, see the link. The gist is that the "voluntary haircut" component of the most recent Greek bailout isn't working the way it was intended, and neither Greece nor Germany (and other Euro creditors) are especially interested in yielding to the other at this juncture. They may continue to muddle through as they have previously, but hopes that the recent bailout-plus-haircut approach is going to be sufficient have been weakened.


Benjamin Thomas Sutpen said...

You see, that's the kind of biased reporting, which shapes Americans' perception of events within the EU.

Merkel insisted a few days ago that Greece will not be leaving the Eurozone and that Germany would assure that. Here she hints at something else all of a sudden.

And the point of Rutte's proposal is of course not that Greece might (after treaty change! aka far into the future...maybe) be kicked out but that the Commission would be able to govern states not adhering to the Stability Pact. And that of course would be a major, major step towards fiscal union and economic governance. You're title is kind of ironic in that sense.

I also disagree that the problem for Greece is the 'voluntary haircut' component. It's the whole package for Greece that is failing not any particular part of it.

EU Fiscal Union Is Highly Unlikely, con
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