Give Angela some respect

sdThere still lingers a potentially lethal misunderstanding that governments of the Club Med are in time to dodge. After a year seemingly spent in committing as many offences to the markets as analysts feared and investors could imagine, the freezing waves of budget austerity will sooner than later reach our shores: the discourse that points at Germany as their only source must be disarmed and exposed for what it is, stubborn party-politics in the midst of a crisis that demands a true European stand.

The caricature of a crude imperialist chancellor Angela Merkel fits well in that distorted picture in which ordinary citizens of Greece, Italy, Spain and Portugal appear enjoying a nap under the afternoon sun, their luxurious welfare needs covered by state subsidies, only waiting for lavish pension schemes to begin pouring into their overstretched credit accounts. Both portraits are false. In Spain, for instance,

Household debt has decreased in 2010 by almost 11 billion euros from its peak in 2008, presenting negative growth rates during the last two years (-0.6% on average).”

In this sense, although it may have sounded dull to some

(no one ever accused Spain’s new prime minister of being exciting, said err… The Economist),

Mariano Rajoy’s speech was a sober reminder that the main causes of upcoming public investment cuts are the many wholes in the national balance sheet. He didn’t blame it on abstracts of volatility or speculation, or strict accords with foreign financial institutions. Mr Rajoy simply recited out loud data about the actual shape the Spanish economy is in –and this was the first time someone at the Moncloa palace did so.

Presidents and prime ministers of EMU member countries should replicate the experience in public, too: it focuses the debate where it belongs, that is, the excesses in the private sector and, unfortunately, the corruption in the public finance management, all elements that always hide behind bubbles that eventually burst.

This is not to say the euro can be rescued merely via stringent spending programmes plus ever further regulations in those countries whose deficit and outstanding debt push them every day an inch closer to default.

Jacques Delors, the former president of the European Commission, claims that errors made when the euro was created had effectively doomed the single currency to the current debt crisis. He also accuses today’s leaders of doing ‘too little, too late,’ to support the single currency.

“When ‘Anglo-Saxons’ said that a single central bank and currency without a single state would be inherently unstable, ‘they had a point’, he admits.”

Euro’s structures are deficient in themselves, which have triggered a snow ball-like effect once the common currency is faced with its first crisis. True enough, equally, is the fact that

The error, stamped Made in Germany, was insisting on forcing through fiscal adjustment in Greece without any European investment plan to bolster the country’s growth. This has brought in its train economic asphyxiation and a suspension of the country’s debt payments.”

To sort out national economies and finances requires long-term solutions, but to rebuild trust among investors and restore access to the markets the moves ought to be swift. The question is whether the latter would relax the former rendering the whole exercise pointless. This is no time for a PIGS’ reaction against Merkel’s diktat: it would be a dumb war, and Europeans have already proved we know how to avoid them.

About the Author

Victor Jimenez
London contributor at, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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