Euro crisis: “there is no unity at present in the euro zone about what needs to be done”

A couple of reports in the Irish Times to emphasise a point made recently by Tim Garton Ash.  First up a quote from the German Chancellor, Angela Merkel.

“We are at the start of this work and there is no unity at present in the euro zone about what needs to be done,” she said. “We have to stabilise things first, exchange views and at a later point say what needs to be done and how, and where we have majorities.”

And from a report on the EU Finance Ministers’ meeting in Brussels

Although everyone says the commission’s proposals to intensify budgetary surveillance go in the right direction, they don’t want to erode national prerogatives. This raises questions as to how far they will travel down the road to tougher central scrutiny and “peer pressure”.

With the European authorities under pressure to seize the initiative in a crisis which has upended many of the basic tenets of monetary union, the objective of yesterday’s meeting is to significantly strengthen the euro rule book.

By kicking to touch seismic options such as restructuring, the ministers narrowed the range of measures that might be deployed to strengthen the inadequate rule book. In short, they will operate within existing provisions to cast aside the unwillingness to impose financial sanctions on errant governments. This power lies within the scope of current legal provisions but has never been deployed.

Fining a country could be a “nuclear” option. In the heat of the current imbroglio, however, it was market pressure that led Spain and Portugal to adopt tough new austerity measures. Reviewing the Stability and Growth Pact could well see the inclusion for the first time of competitive indicators such as unit labour costs and the role of expanding indebtedness in a country’s growth. That makes sense but is deeply political.

This work is complex and has exposed deep tension between competing economic traditions. From Berlin come loud demands for euro countries to adopt Germanic rigour in their budgets.

In the opposite direction flow demands for Merkel to stimulate consumer demand in Europe’s largest economy.

The debate will continue for months. The aim is to produce an interim plan for the next summit of EU heads of state and government in four week’s time with a view to final decisions by October.

Meanwhile, battles on the markets continue day by day.

Alternatively, “We all know what to do, but we don’t know how to get re-elected once we have done it.”

I’m not hearing that “voice of calm” anymore…