Astonishingly, since our summit the cost of borrowing has increased again for a number of euro area countries. I say astonishingly, because all macro economic fundamentals point in the opposite direction. It cannot be stressed enough that Greece is in a unique situation, not comparable to that of the other eurozone countries. Italy will generate a primary surplus in 2011 and, with the additional austerity package just adopted will have a balanced budget in 2014. Spain has a low debt stock around 70%, below the EU and the euro area average, and has taken courageous measures to reduce its deficit and boost growth. In all these cases, the current market assessment of risks are totally out of line with the fundamentals and it is ludicrous that CDS-rankings put these countries in the top tier of default risk countries.
Finally, it is imperative to bear in mind that this is not a crisis about the euro. In the aftermath of the financial crisis of 2008, all developed countries are faced with increased public debt. Given the interdependence of these economies, as we have clearly seen first hand in the European Union, it is in everyone’s interest that each country should find a solution to this burden, tailored to their own needs, which will have a direct effect on jobs and growth in the coming years.
Astonishingly! And, of course, moving towards even greater fiscal union had nothing to do with the existential crisis about “an incomplete construct”. Even if changing the rules raises incredible doubts about your credibility…
[Europe is still sexy! – Ed] Of course it is.