Eurozone finance ministers met yesterday Friday September 16, to discuss ways of dealing with the spiraling systemic crisis of the euro. A special guest was US Secretary of Treasury Mr. Timothy Geithner who held a 30-minute meeting with his European counterparts. Mr. Geithner previously expressed what every single individual outside the political games of the EU/Eurozone believes: “Europe has the capacity to contain its debt crisis, but must choose to do so”. Mr. Geithner put forward some of his ideas regarding ways of redesigning the European Financial Stability Facility (EFSF – the bailout fund). He spoke of the need to put an end to the loose talk of politicians that confuses and unsettles the markets, thus making things worse. His sensible comments, which were nothing more than constructive opinions and not some binding directive met the resistance of some finance ministers, with the Austrian, Ms Maria Fekter saying the following:
“I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone, that they tell us what we should do and when we make a suggestion … that they say no straight away.”</p> The comment of Ms. Fekter apart from being yet another sign of the cacophony that plagues Europe, is derisory and detached from reality. The comparison between average data across the eurozone with the data of the US constitutes a serious misunderstanding of (a) the systemic nature of the crisis of the euro, (b) the profound difference between the eurozone – a mere monetary coalition of 17 states with no fiscal powers – and the US – a state in its proper sense with all powers at its disposal to deal with its crisis (see my analysis On the speculation against the Euro). Ms. Fekter might want to show to her local electorate how “determined” she is, yet such comments are not helping us escape from the crisis. At least Eurogroup chairman Jean-Claude Juncker was much more diplomatic on the matter:
“We are not discussing the expansion or increase of the EFSF with a non-member of the euro area,”</p> After putting aside all this “gossip” talk and focusing on the real problems and on the need to address them, we see that no tangible proposal was put forward, apart from those well-know promising statements that speak of “commitment” and “agreements”. Europe has relied too much on such promises and has “forgotten” to implement system-wide measures to address all three dimensions of the crisis of the euro (hence Geithner said what he had to say).
Judging from the outcomes of the “informal” meeting I uphold that another set of half-measures will eventually be agreed to in the weeks ahead, to kick the can forward for yet another time. I am afraid our European leaders are not discussing the fundamentals of the crisis and the grave need to put together a Euro-wide strategy to deal with the systemic crisis.
No mention to the need for cleansing the quasi-bankrupt European banking system of all the toxic paper it has accumulated so that it stops acting like a black hole. No mention to the need for a growth spree to push the European cart out of the mud. No mention to the fundamentally important need to stop using taxpayer money for non-productive half-measures (expensive bailouts to states and to private banks).
Mr. Geithner also spoke of the need for fiscal stimulus (for growth in other words), which is sort of an anathema in our continent that is plagued by fiscal discipline delusions and austerity obsessions. “Fiscal consolidation remains a top priority for the euro area,” as Mr. Juncker said. With such mentality, expect the crisis to get worse and worse.