The European crisis isn’t over until the First Lady pays, and the First Lady of Europe, Angela Merkel, cannot pay enough. She needs to erect a large enough firewall to ensure that the European Union’s weaker members do not, again, face financial disaster. That will not happen – which means the euro faces at least defections, and perhaps destruction.
The crisis had seemed to recede somewhat in early 2012, and the headline writers moved on. But it had only seemed to recede, and relaxation was premature. As Hugo Dixon of Reuters’ Breaking Views put it on Monday, “the risk is that, as the short-term funding pressure comes off, governments’ determination to push through unpopular reforms will flag. If that happens, the time that has been bought will be wasted – and, when crisis rears its ugly head again, the authorities won’t have the tools to fight it.”
But the underlying tension remains between high indebtedness in nearly all the EU countries and the need to pare back public spending without suffocating the economies. The flat, or negative, growth lines in the same countries that are indebted are likely to be made worse as demand falls and a malign cycle threatens.
Merkel commands the stage, but she is a constrained commander. She has an electorate and a parliament that has been reluctant to agree to more assistance to those whom many Germans see as architects of their own misfortune, not to be trusted to do anything other than load the burden on to the backs of hard-working Northerners.
In other parts of the Union, signs of strain now manifest themselves daily. In France, the leading candidates – President Nicolas Sarkozy and Socialist contender François Hollande – have turned inward and, in the words of a sharply worded Economist editorial, while “it is not unusual for politicians to ignore some ugly truths during elections … it is unusual, in recent times in Europe, to ignore them as completely as French politicians are doing.”