We won’t be cruel by reminding you
that François Hollande, recently, and his
predecessor Nicolas Sarkozy, last spring, had declared the Eurozone crisis
« over »... All the different bailout plans are only fragile
undertakings, and the smallest shock can bring them down, as we know and are
witnessing right now.
Greece, again and always, isn’t out
of the woods. Last week, it secured yet another plan, for 84 billion euros
(40B for a debt haircut and 44B of fresh money). Everyone knows this plan
won’t be the last, and that a massive restructuration is needed. And as
for Spain, banks received 37 billion euros, and it’s only the first
We had almost forgotten Ireland and
Portugal, but we shouldn’t have. Ireland central bank’s governor
just announced that « it may need considerably more time to repay
» the 85 billion euros Ireland has received as part of its bailout
plan. In Portugal, the newspapers are writing that the country will ask for
the same conditions that Greece got, meaning debt haircuts and more money.
But the big scare of the week comes from
Italy. Two events are changing things : Silvio
Berlusconi announced his political return, and Mario Monti
resigned. There will be anticipated elections in February or March, and this
will bring some uncertainty for a while. All the patient work Mario Monti has done with structural reforms might be for
naught, and the markets are weary of Italy.
The euro crisis is far from over. We are
only witnessing periods of relief that are bought with more bailout plans,
which only adds to the mountain of debt and to the instability of the system.
The economic reason has faltered a long
time ago; it has been replaced by the political agenda. As the French
elections were nearing, it was paramount to avoid a grave Eurozone crisis.
Now, the horizon is fixed on the general elections in Germany in September
2013. The institutions of the Eurozone will do everything in their power to avoid
a crisis, including showering all the above-mentioned countries with billions
of euros. The ECB will oil the machine, and Angela Merkel will be able to say
that the euro crisis is over or, as the prudent German she is, that
it’s about to be solved. And we’ll see after the election!