The eurozone is doomed, every solution is a failure
by our secret columnist in Brussels
Does anybody really have any idea what to do about the crisis in the single currency area? At the last count, there were 15 bright ideas and our resident satirist Schadenfreude suggests that not one will work - urging EU leaders to head back to the drawing board
The solution list and why the ideas are unworkable
1. Fine eurozone countries that break the rules. How does that help them to recover?
Would any fines ever be levied or paid?
2. Recapitalise the banks so they can start lending - including lending to governments? This pushes up sovereign debt even further.
3. Mutualise the debt of eurozone members. Who pays the interest? What incentive is there to cut back, if others will pay up?
4. Issue Eurobonds, which would be backed by collective single currency area credit. Would anybody believe it strongly enough to buy at the low yield?
5. Quantitative easing to pump more euro money into the system. More money and the same production means inflation.
6. Fiscal federalism. It depends on the 'federation' collecting revenue - or borrowing - and redistributing to the least performing member states. A distant pipe-dream, indeed.
7. Fiscal union. Like 6, but no federal fund. Every participant has the same fiscal profile. And pigs might fly over finance ministries heads.
8.. Cut spending and raise taxes. And lose elections.
9. Invest in growth. The whole of the European Union budget, if so deployed, provides 1 per cent of EU gross domestic product. Would it make any difference?
10. Germany should inflate, encourage domestic spending, and push up export prices. Weimar is a memory too strong for this to be a realistic consideration.
11. Expel from the eurozone Greece, Italy and Spain. Everybody loses.
12. European central banking regulation. But don't we have it already, the inactive, headquarters of the European Banking Authority being in London? What stops it taking action?
13. A Tobin tax or financial transaction tax. It would provide the EU with revenue and possibly reduce speculation. But, perhaps, it would also disable the London financial services market - causing damage all around.
14. Reform the ratings agencies - which attack the credit-worthiness of sovereigns, banks and so on. Who would believe a tamed mouthpiece?
15. Default on sovereign debt. Say goodbye to borrowing to cover needs uncovered by revenue.
September 12 - judgement day for Europe?
The next crucial date in the calendar is September 12 when the Germans will give their final response on the eurozone rescue fund, the Dutch people will vote and the European Commission is expected to unveil plans for a banking union, Francesco Guarascio