Remember the euro crisis? For most of 2012, politicians, investors and business leaders were almost unanimous in their belief that the possible breakup of the euro would be a massive risk to the world economy. But today the euro is 5 percent higher against the dollar than it was six months ago, European stock markets have outperformed Wall Street by 11 percent in the same period, and Italian government bonds have been among the best investments of 2012.
The Nobel Peace Prize conferred this week to the European Union included three men who, under the EU’s byzantine institutional structure, are all entitled to be called “President of Europe.” With the award, it seemed as if the euro crisis might be almost over.
Silvio Berlusconi burst back onto the EU stage this month with his trademark chutzpah and slapstick timing, disparaging the technocratic government that has been given credit for putting Italy back on the road to financial prudence and thereby saving the euro.
By attacking Prime Minister Mario Monti’s governance, Berlusconi reopened all the old arguments about the sustainability of a single currency in this quarrelsome club of 17 divergent nations. Italian shares, bonds and the euro all fell sharply. And in EU diplomatic circles, anxiety about another clash between Germany and the Mediterranean laggard nations reached a fever pitch.
Berlusconi, in the first major television broadcast of his new campaign, hinted at an anti-German campaign that may lie ahead. He attacked Monti for imposing “German-centric policies” and accused Germany of sabotaging the Italian government by manipulating bond market “spreads” (a word that may be now as familiar to most Italians as “ciao” or “pronto”). These spreads, Berlusconi said, were “con-tricks” and “inventions” designed by Germany to topple his elected government while German businesses and banks crushed their Italian competitors with artificially high borrowing costs. Guido Westerwelle, Germany’s foreign minister, retaliated immediately, which was perhaps unwise. Germany would not interfere in Italy’s internal politics, he said, but there is “one thing we will not accept ‑ that Germany should be made the target of a populist election campaign.”