Barroso calls for end to eurozone contagion

When the eurozone is marching towards more sustainable deficits, why did the bond markets suddenly pounce on Cyprus, Italy and Spain?

Their public deficits are far from new. The structural weaknesses and the resulting lack of competitiveness of these Mediterranean countries are notorius – and age old old problems they will ultimately have to confront and overcome.

The twin tracks of the Stability and Growth Pact and the Europe 2020 strategy are as true as ever.

After the competitiveness theme, with the Wealth of Nations roundup and Growth and competitiveness: California vs Europe as the latest contributions, I wanted to take a peek at the latest patients destined for compulsory care by the financial markets.

My musings started a series about Cyprus, Italy and Spain in the eurozone crisis (in Swedish, but with a number of links to materials available in English).

Grahnblawg: Turbulens trots minskande budgetunderskott i Europa (3 August 2011)

Grahnlaw Suomi Finland: Euroakuten: Cypern, Italien och Spanien (3 August 2011)

Grahnblawg: Euroområdet: Kortsiktig nervositet och långsiktiga reformer (4 August 2011)

Grahnlaw Suomi Finland: Ledare och bloggar om eurokrisen (4 August 2011)


Eurozone summit

In the background we have the eurozone crisis summit, with its conclusions on the agreed measures for Greece (including private sector involvement), extended powers for the EfSF and the ESM, lower rates for Ireland and Portugal, commitment to fiscal and growth targets etc:

Statement by the Heads of State or Government of the Euro Area and EU institutions; 21 July 2011 (4 pages)

Some may prefer a more journalistic approach. Spiegel Online explained the main decisions of the eurozone summit: What Was Decided at the Euro-Zone Crisis Summit (25 July 2011).

Barroso goes public

Yesterday brought some additions to the emerging picture. Commission president José Manuel Barroso published his letter to the heads of state or government. Despite the economic and budgetary fundamentals, Barroso explicitly mentioned the bond markets of Italy and Spain (as well as other euro area states) as ”a cause of deep concern” for the euro area as a whole.

Barroso called for the speedy and unconditional approval of the decisions of the eurozone summit 21 July 2011, but he also saw the need for further action to stem contagion. Barroso publicly proposed a reassessment of the beefed up European Financial Stability Facility EFSF and the the new European Stability Mechanism ESM:

Whatever the factors behind the lack of success, it is clear that we are no longer managing a crisis just in the euro-area periphery. Euro-area financial stability must be safeguarded, with all EU institutions playing their part with the full backing of euro area Member States. We need also to consider how to further improve the effectiveness of both the EFSF and the ESM in order to address the current contagion.

Concretely, I would like to call on you to accelerate the approval procedures for the implementation of these decisions so as to make the EFSF enhancements operational very soon. These changes should also avoid introducing excessive constraints in terms of either additional conditionality or collateralisation of EFSF lending. I trust that governments and national Parliaments will rapidly approve these decisions necessary to improve the EFSF flexibility.

I also take the opportunity to urge a rapid re-assessment of all elements related to the EFSF, and concomitantly the ESM, in order to ensure that they are equipped with the means for dealing with contagious risk.

Media

Andrew Rettman on EUobserver noted that the Barroso letter was more outspoken than his earlier press statement. The article analysed the text of the letter and added comments by the Commission spokesperson: Barroso raises alarm about severity of euro crisis (4 August 2011).

EurActiv draws a background picture, with references and links to messages from various European capitals: Barroso asks leaders to stand firm on pledges (4 August 2011).

Ivan Delibasic contributed with another background in New Europe: It's all 'bear' and no 'bull' for Spain and Italy (4 August 2011).

In the European Voice, Simon Taylor offers an account of the Barroso letter: Barroso warns of eurozone crisis spreading (4 August 2011).

Deutsche Welle reported both German disapproval of Barroso's ideas and the downward spiral on bond and equity markets (in German): Barroso befürchtet Ausbreitung der Euro-Krise (4 August 2011.

On the FT Brussels blog, Joshua Chaffin discussed the vicissitudes of politics in Cyprus against the backdrop of the eurozone crisis: How will Cyprus restore its finances? (4 August 2011).

***

To grow commensurate to the tasks, the European Union (eurozone) needs to become more effective, which in turn requires a union based on the sovereignty of its citizens.



Ralf Grahn


P.S. Great resource: For quality articles and wise comment from the European press, you can follow Presseurop in any of ten available languages.

Eurobarometer media roundup reveals four readings

From a summary of the Eurobarometer controversy we set course for our following harbour: a roundup of how the latest EU-wide poll of public opinion has been received. In Roundup haven we bunker facts and arguments for the next leg of our voyage.

We find four threads of thought in the news reports and comments on the latest Eurobarometer poll.



Economic challenges

Some of the news reports and comments have focused on the growing demand for economic policy coordination and reform, the points the European Commission chose to highlight in its press release.



It’s the economy, stupid, said a curious Yankee in Europe’s court, intimating that US and EU citizens share common priorities about economic woes.



On the WSJ Real Time Brussels blog, John W. Miller highlighted a broad base of support for spending cuts and belt-tightening.



The Eurolocal blog gives extended coverage (in Catalan) to the support for economic reform: Els ciutadans de la UE, a favor de reforçar la governanca econòmica europea!



Plunging EU support

Much of the news reporting concentrated on the sinking levels of support for EU membership, something Open Europe also stressed, besides bitching about the Commission.



Marcin Grajewski recorded for Reuters that popular support for European Union membership had fallen to a nine-year low, in May when the EU was hit by sovereign-debt problems and when some member states were in recession.



Meera Louis, for Bloomberg, reported that Europeans’ confidence in the European Union dropped to a six-year low as the 27-nation bloc battled the Greece-led debt crisis.



Even prospective members have gone cold on the European project, with just 27% of Turks saying they trust Brussels, said the Bulgarian news agency Novinite.com.



Public support for the European Union has collapsed to a nine-year low in all of its 27 countries, was the reading of The Daily Express in the United Kingdom, news warmly received by anti-EU commentators.



Euro(barometer) sceptics



The European Citizen was sceptic about the possibilities to draw real policy conclusions from vague Eurobarometer questions and answers. In his latest comment, Eurocentric thought it was a pity that the Commission and Open Europe thought that they had to spin the results. He has now posted a German version of the post on the blog Ein europäischer Bürger.



According to Gary Finnegan, asking vague questions which invite predictable answers, and then concluding that the respondants support your political position is wrong.



Emerging synthesis?



In an opinion piece on Presseurop, Marco Zatterin reaches a synthesis. The European Union is plunging in the polls because more and more people feel the EU should be the one to solve the problems of the recession. As a matter of fact, three quarters of Europe is calling for more policy coordination.

Fewer people believe Europe is “a good thing” not because they’re against integration per se, but because they feel betrayed by the 27 and the way they’re handling it. They are demanding more, wrote Zatterin.



The article was originally published La Stampa (in Italian): Il tradimento dell’Europa.



Besides the Italian original and the English translation, Presseurop has published versions in Czech, Dutch, French, German, Polish, Portuguese, Romanian and Spanish.



Detailed discussion



These are the four main strands I was able to find. Most of the instant news reporting fell into one of two categories, either focusing on the demand for more ‘economic governance’ at EU level, or highlighting the declining support for membership in the European Union.

A third line of thought found expression in scepticism regarding the value of opinion polls like Eurobarometer.

A fourth thread was presented in the La Stampa / Presseurop article available in ten languages. Marco Zatterin drew his conclusions about the great expectations of Europeans and the failed delivery by the EU institutions.

Our next stages require detailed study and discussion about individual questions and results reported in the Spring 2010 Eurobarometer. How much can we, in good conscience, read into the replies?




Ralf Grahn



P.S. Comments relevant to the topic discussed in each Grahnlaw blog post are most welcome. However, the number of spam comments has skyrocketed. This is the sad reason for comment moderation, so it may take a while before your valued comment appears.

It is easier to understand a language than to use it correctly. As Eurobloggers we could and should promote interaction among Europeans across borders and between linguistic communities. Grahnlaw has adopted a multilingual comment policy:

I do my best to read comments in Danish, Dutch, English, Finnish, French, German, Italian, Norwegian, Portuguese, Spanish or Swedish, even if the Grahnlaw blog and my possible replies are in English.



Antonia on the Euonym blog (Talking about the EU) tells us that the European Commission in the UK arranges a Day of Multilingual Blogging on 26 September 2010, and the UK Representation has been joined by the multilingual aggregator Bloggingportal.eu and individual Eurobloggers. Join the event page on Facebook, spread the word through social media and personal contacts, begin preparing your blog posts and start learning a new language.