At the Telegraph blog, Andrew Lilico takes his life in his hands to ask, “Is it time for the eurozone to turn into a Single European State?” A key point he makes, I’d suggest
OK – so what do we do, if we don’t want to break up the euro altogether? First, we have to accept (a) that this is fundamentally a political project, a precursor to a Single European State, and must be accepted as such by all its members; and (b) that it can’t have all its current members. Pick who is going to be in (bearing in mind what follows) and then stick to it. Until recently, I thought that could mean all current members other than Greece. Now, I fear it might mean the removal of Portugal, Slovakia, and Finland, also. But it’s ultimately a political choice. It must also be assumed-complete – that is to say, matters should proceed on the basis of those that will be members immediately, not those such as the UK one might hope will join at some distant future date.
As he says at the end
A Single European State should, if pursued decisively and openly, with adequate internal transfers, strict enough budgetary rules, and the decentralisation and denationalisation of the banking sector, be a politically and economically viable project. Indeed, it could be one of the great inspiring political projects of our age, the creation of a new superpower. But the time for subterfuge and muddling through has passed.
As BBC Europe editor, Gavin Hewitt, notes
It has not taken long, but increasingly attention is turning to the endgame of the eurozone crisis.
The scenarios fill the comment columns and seep into conversations, even with EU commissioners.
Everyone seems to accept that “the centre cannot hold, things fall apart”. So every idea is in play: a break-up of the eurozone, Greece leaving, fiscal and political union, European bonds, a European treasury etc. It is at last being recognised that papering over and pretending cannot continue.
And, ahead of this week’s proposed emergency summit
Stress tests for euro zone banks released on Friday failed to stem the anxiety about a potential Greek sovereign debt default. Fears of the debt crisis spreading to other countries in the euro zone led to a spike in Spanish and Italian bond prices.
The Euro also fell against other major currenicies while gold prices climbed to a new record high.
The yield on Spanish 10-year bonds rose to 6.36 per cent in trading, one step closer to the 7 per cent mark above which investors usually lose faith in a country.
Italy’s 10-year bond yield broke through 6 per cent today, a euro-era high, Irish 10-year bond yields also climbed , heading above 14 per cent. Two-year bond yields were 0.104 per cent higher to 23.218 per cent.
The rising cost of funds for Italy and Spain is intensifying pressure on euro zone policymakers to come up with a plan to address the debt crisis when they meet on Thursday.
RTÉ reports on an interview by Jean-Claude Trichet, head of the European Central Bank, and his warning that “‘governments need to speak with one voice on such complex and sensitive issues as the crisis”.
Trichet also expressed confidence that the euro zone would overcome the current crisis, which has dragged Greece, Ireland and Portugal into bail-outs and which markets speculate could pull down Spain and Italy.
‘Naturally the Europeans can manage the issue. It is not a question of technique. It is a question of will and determination,’ Trichet said.
‘The countries of Europe have always demonstrated that they pull together when the challenges are very high.’
Trichet also sounded a warning that any default on Greek sovereign debt as part of a second rescue package for Athens would mean that the ECB would not accept the country’s bonds as collateral for loans.
Greek banks are heavily reliant on funding from the ECB and offer government bonds they own as collateral.
There are concerns that any restructuring of Greek debt being discussed by euro zone leaders, either through a debt rollover, swapping Greek bonds for new ones or a bond buy-back, could be seen rating agencies as a default.
‘The governments have been warned,’ Trichet said. ‘If a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral.’