EU downfall?

If one believes the talk coming from leading European politicians, then the fate of Europe's common currency, and possibly the fate of the European Union, is at stake.

If that were the case, one would expect the highest level of unity among member states. However, like before, different governments are tugging away in different directions. In doing so, the Germans have been placed in a very tough position.

Yet shortly before the task group of European finance ministers met for the first time in Brussels on Friday, Berlin decided on its own to ban the practise of naked short selling. To actually make such a move effective, one would need global agreement, or at least coordination among European states.

Therefore, the decision gave the impression that German Chancellor Angela Merkel carried out the move based on domestic political grounds. She needed to show her leadership skills in the face of intense charges of hesitation and selling out. Essentially, it was a purely symbolic move.

Overall, it has become trendy in Europe to blame the crisis on “evil” speculators. They, of course, are partly responsible and they worry about fierce reactions in the markets. But it is also true that against national economies with solid leadership, speculators have no chance. It is always easy for politicians to point fingers at anonymous forces, but they are simply distracting people from their own failures in fiscal policy.

Shifting into focus

The fact is that essentially all European states have lived beyond their means for far too long. Governments from left to right have shied away from saying this to voters. In fact, the ruling coalition in Berlin had until recently been discussing tax cuts. In Germany, the budget deficit is relatively marginal, yet the aggregate debt is all the greater.

Therefore it would now be good if finance ministers placed consolidation back in focus. But if the German government continues to insist on discussing contract changes to the Lisbon Treaty as a way of dealing with troubled economies, it would make for a difficult consensus. If one thinks back to how long and hard the EU struggled with the Lisbon Treaty, then if possible one would not touch the idea of contract changing. Whoever tries will only reap controversy.

Author: Christoph Hasselbach/mk
Editor: Martin Kuebler