EU squabbles feed market frenzy
The European Union can rarely have been more in need of a
show of unity than now, as it tries to convince financial
markets it can handle the euro zone’s debt crisis.
Hardly a day goes by without a European leader underlining
the need to act together, but hardly a day passes without signs of
differences among them that undermine the impression of unity.
This week is no exception. European Commission President
Jose Manuel Barroso said in a speech in Brussels on Tuesday:
“We can turn today’s challenges into opportunities only if we
stand together, give a collective response.”
But comments he made in an interview published hours earlier
showed the EU’s leaders are anything but united in their vision
of how to tackle the crisis.
In the interview with Frankfurter Allgemeine Zeitung, Barroso
dismissed as “naive” Germany’s call for the EU treaty to be
modified to prevent a repeat of Greece’s debt crisis — and
Germany hit back quickly.
Economy Minister Rainer Bruederle said he was surprised at
the remarks and went on to criticise a joint euro bond
proposed by European Union President Herman Van Rompuy,
saying it would create the wrong incentives and reward member
states that do not pursue sensible budget policies.
“What we need are clear signals for solid state finances in
order to secure trust in the euro over the long term, and to
prevent future crises,” Bruederle said.
Investors and financial markets are also looking for
clear signals from the EU. Despite agreement on a
110-billion-euro rescue package for Greece and then on a
750-billion-euro safety net for other euro zone countries,
the messages being sent by the EU are often mixed. EU
leaders’ public statements sometimes do more to heighten
market concerns than ease them.
So what can the EU do to reassure the markets?
One obvious answer is to forge exactly what EU leaders
themselves are calling for — genuine unity — and refrain from
criticising one another in public.
Another would be to act quickly — something EU leaders call
for constantly, yet often find hard to do, partly because of the
EU’s creaking institutions and bureaucracy. Agreement on the
huge euro zone safety net over the weekend of May 7-9 showed
the EU can at times act quickly when required.
National leaders in the EU are also being urged to put
long-lasting European interests above short-term domestic
political needs. Political courage is needed for this, and it
may be hard to find unless there is a change in the sceptical
public perceptions of the 27-country bloc, which represents more
than 500 million people.
Commentators and policymakers are likely to be kept busy
discussing this question for a long time. What must be
particularly worrying for the EU is the fact that many experts
see less cause for optimism than at any time for decades.
“Normally in the past the EU was pretty strong in dealing
with serious crises and always got an impulse out of it,” said
one analyst, Ulrike Guerot of the International Council on
Foreign Relations think tank. “Will this be the case now? I
don’t know and it is the first time I don’t know.”