To anyone who’s been following Europe’s inability to co-ordinate itself in climate talks or the G8 or G20, Alan Beattie’s commentary on Europe’s approach to co-ordinating the Greek bailout will sound horribly familiar:
Repeated inconclusive meetings of European finance ministers; public squabbling over lending conditions; debates about the role of the IMF; doubt, even, whether bail-outs are permitted by EU and national law. A bizarre diversion halfway into talk of creating a European Monetary Fund completed the picture of an exercise in cat-herding. The delay and confusion has made default more likely and squandered the benefits of IMF involvement. Since the fund is providing some of the loans, Greece will be branded with the IMF stigma, for sure. But, apparently for reasons of self-esteem, the eurozone wants to do most of the lending itself – at higher interest rates than the IMF – and to set the conditionality. At a stroke this dilutes the benefits of the fund’s cheaper lending, forsakes some of its policy credibility and diminishes its use as a political flak jacket.
Even now, approving the loan in each of the 16 eurozone states will take another week. Adherence to constitutional niceties is admirable, but this is a debt crisis in the capital markets of the 21st century, not the Congress of Vienna. If it takes nearly three months to get agreement in the eurogroup, then the eurogroup should not be leading a financial rescue. The house is burning down, and the eurozone is sitting around debating the constitutionality of calling the fire brigade or filling a bucket of water.
