Whatever happened to Europe’s debt crisis?
If people stop commenting on the financial crisis, does it still exist?
A month ago, Europe was in the throes of fretting about Greece’s debt problems and whether they were going to spill over to Portugal and Spain, bringing down the euro and a decade of monetary union with it. At the same time there was intense anxiety about impending results from stress tests on nearly 100 European banks.
Every day — and sometimes several times a day — European Union officials, ministers, leaders or central bank governors would say something about the crisis, providing more fodder for frazzled financial markets to make another round of cliff-hanging calls over whether things were getting better or worse.
The market gyrations would prompt more questioning of officials, adding more verbal fuel to the fire, keeping the merry-go-round twirling.
Of course, decisions were also being taken that helped calm fevered brows — Greece took steps to cut government spending, the stress test results largely proved reassuring, and Portugal and Spain financed their debts through the markets without too much disruption.
But mostly, officials just stopped commenting on the crisis. Why? In large part because European went on holiday.
The European Union effectively shuts down in August — the Commission holds no briefings, the European Parliament is in recess and there are no leaders’ summits. This year most headed for the beaches in the last week of July.
That removed a major factor from the crisis — the people who were both intensely worried about it AND in a position to be quoted on it, whether they were saying anything well-founded or not. It also removed the possibility that two or more people might comment on the same day, or make a series of contradictory statements that caused more confusion than clarity.
In the space of week or so, the markets were suddenly starved of a major supply of oxygen that had kept the crisis fires ablaze. Almost by default– and not forgetting the concrete measures some countries and institutions did take to stabilise the situation — the markets began to find a calmer pitch.
It’s also worth noting that many players in the markets — hedge fund managers, traders, speculators, investors — also took holidays at the same time, meaning the other side of the equation, the bit that can translate poorly worded or nervous-sounding statements into market fluctuations, was also out of commission.
So perhaps the answer to financial market stability at times of crisis is for everyone to take a well-earned rest.