WASHINGTON (MarketWatch) — Angela Merkel seems surer than ever to win her third term as German chancellor in September, Antonin Samaras survived as prime minister after a court blocked his effort to shut down Greece’s state-run broadcaster, and Enrico Letta finally produced a “budget-neutral” package of measures to boost the Italian economy.
So everything in euro-land really is, as European Council President Herman van Rompuy indicated this week, just peachy. Or maybe not.
The roller coaster ride in Europe shows the weakness of coalition politics as today’s upswing can become tomorrow’s downturn.
Merkel would win in a landslide if Germans could vote directly for chancellor, but the possible failure of her junior coalition partner to clear the 5% hurdle for parliamentary representation might force her Christian Democrats, currently polling at about 40%, into a grand coalition with Social Democrats and limit her ability to govern.
Greek Prime Minister Samaras faced the collapse of his coalition over his decision to shut down ERT, but got a reprieve when a Greek court ordered the broadcaster back on the air while agreeing it must be streamlined.
Samaras survived to fight another day but now he must negotiate with his coalition partners to implement the court decree even as they become concerned about Samaras’s growing tendency to govern by emergency decree.
Italian Prime Minister Letta’s center-left Democratic Party scored big in municipal elections, capturing city halls in Rome and other major cities at the expense of his conservative coalition partner led by Silvio Berlusconi and the protest movement of comedian Beppe Grillo.
But Letta faces a showdown with Berlusconi over an increase in the country’s value-added tax to compensate for the rollback of property taxes demanded by the Berlusconi as a condition for his party joining the coalition.
Berlusconi also opposes the prospective VAT increase and said this week that Italy should flout the euro requirement to keep government deficits at less than 3% of gross domestic product. He could topple the coalition at any moment if he comes to believe that new national elections would strengthen his hand.
Tomorrow, in short, could bring fresh crises that would once again test the fragile bonds holding these two beleaguered governments together.
So Van Rompuy’s declaration to journalists attending the G-8 summit in Northern Ireland that “the euro EURUSD -0.86% is no longer under existential threat” puts an optimistic spin on a situation that remains deeply uncertain.
The fact is that the ongoing euro crisis has put considerable strain on national parliaments and coalition governments throughout the continent, so that no democratic leader — not even Germany’s “Iron Chancellor” — is invulnerable.
The reason, as American economist James Galbraith made clear to a Greek audience last week, is that the economic issues thrown up by the financial crisis — and exacerbated in Europe by the common currency — are international and systemic in nature and well beyond the ability of national governments to cope with.
The original mistake, Galbraith said at a rally in support of ERT in Thessaloniki, was to see the crisis as a series of national problems that could be corrected at a national level.
In Greece, it was seen as overspending and under-taxation; in Ireland, commercial real estate; in Spain, residential real estate; and so on. Somehow all these different problems came to a head at once.
“What a coincidence!” Galbraith said with rhetorical flourish. This false diagnosis has led to five years of unfulfilled promises, mistaken forecasts, and repeated disappointment — in a word, failure, he said. An alternative view, since vindicated by events, has been consistently ignored.
“The central fact of the crisis was the worldwide collapse of a model of growth fueled by private credit markets,” Galbraith said. That system, he added, “is gone, it’s not coming back.”
Failing to acknowledge this, European authorities working through “inadequate institutions” have approached the crisis “with the mentality of debt collectors,” Galbraith said.
The result is that Europe is threatened with “dissolution” of its communities, creating an urgent need to stabilize the social situation and find a new model for growth.
“There must be a European solution,” Galbraith said, that should include mutualizing the debt and mobilizing existing resources like the European Investment Bank to foster reconstruction at a continental level.
Only in this way, Galbraith said, can Europe recapture a “spirit of true and effective democracy” and return to a principle of solidarity that is not foreign in Europe, “not certainly foreign in Germany at all,” but has been forgotten. Then perhaps the roller coaster ride from crisis to crisis would be over and political leaders could sleep at night.
marketwatch.com
So everything in euro-land really is, as European Council President Herman van Rompuy indicated this week, just peachy. Or maybe not.
The roller coaster ride in Europe shows the weakness of coalition politics as today’s upswing can become tomorrow’s downturn.
Merkel would win in a landslide if Germans could vote directly for chancellor, but the possible failure of her junior coalition partner to clear the 5% hurdle for parliamentary representation might force her Christian Democrats, currently polling at about 40%, into a grand coalition with Social Democrats and limit her ability to govern.
Greek Prime Minister Samaras faced the collapse of his coalition over his decision to shut down ERT, but got a reprieve when a Greek court ordered the broadcaster back on the air while agreeing it must be streamlined.
Samaras survived to fight another day but now he must negotiate with his coalition partners to implement the court decree even as they become concerned about Samaras’s growing tendency to govern by emergency decree.
Italian Prime Minister Letta’s center-left Democratic Party scored big in municipal elections, capturing city halls in Rome and other major cities at the expense of his conservative coalition partner led by Silvio Berlusconi and the protest movement of comedian Beppe Grillo.
But Letta faces a showdown with Berlusconi over an increase in the country’s value-added tax to compensate for the rollback of property taxes demanded by the Berlusconi as a condition for his party joining the coalition.
Berlusconi also opposes the prospective VAT increase and said this week that Italy should flout the euro requirement to keep government deficits at less than 3% of gross domestic product. He could topple the coalition at any moment if he comes to believe that new national elections would strengthen his hand.
Tomorrow, in short, could bring fresh crises that would once again test the fragile bonds holding these two beleaguered governments together.
So Van Rompuy’s declaration to journalists attending the G-8 summit in Northern Ireland that “the euro EURUSD -0.86% is no longer under existential threat” puts an optimistic spin on a situation that remains deeply uncertain.
The fact is that the ongoing euro crisis has put considerable strain on national parliaments and coalition governments throughout the continent, so that no democratic leader — not even Germany’s “Iron Chancellor” — is invulnerable.
The reason, as American economist James Galbraith made clear to a Greek audience last week, is that the economic issues thrown up by the financial crisis — and exacerbated in Europe by the common currency — are international and systemic in nature and well beyond the ability of national governments to cope with.
The original mistake, Galbraith said at a rally in support of ERT in Thessaloniki, was to see the crisis as a series of national problems that could be corrected at a national level.
In Greece, it was seen as overspending and under-taxation; in Ireland, commercial real estate; in Spain, residential real estate; and so on. Somehow all these different problems came to a head at once.
“What a coincidence!” Galbraith said with rhetorical flourish. This false diagnosis has led to five years of unfulfilled promises, mistaken forecasts, and repeated disappointment — in a word, failure, he said. An alternative view, since vindicated by events, has been consistently ignored.
“The central fact of the crisis was the worldwide collapse of a model of growth fueled by private credit markets,” Galbraith said. That system, he added, “is gone, it’s not coming back.”
Failing to acknowledge this, European authorities working through “inadequate institutions” have approached the crisis “with the mentality of debt collectors,” Galbraith said.
The result is that Europe is threatened with “dissolution” of its communities, creating an urgent need to stabilize the social situation and find a new model for growth.
“There must be a European solution,” Galbraith said, that should include mutualizing the debt and mobilizing existing resources like the European Investment Bank to foster reconstruction at a continental level.
Only in this way, Galbraith said, can Europe recapture a “spirit of true and effective democracy” and return to a principle of solidarity that is not foreign in Europe, “not certainly foreign in Germany at all,” but has been forgotten. Then perhaps the roller coaster ride from crisis to crisis would be over and political leaders could sleep at night.
marketwatch.com
No comments:
Post a Comment