Euro crisis: “The worst, I fear, still lies ahead.”

The markets have concluded that the eurozone crisis has ended. Several politicians said that they, too, believed that the worst was over. Complacency is back. I recall similar utterances in the past. Whenever there is some technical progress – an umbrella, a liquidity injection, a successful debt swap – optimism returns.

If you think the European Central Bank’s policies have “bought time”, you should ask yourself: time for what? Greece’s debt situation is as unsustainable as ever; so is Portugal’s; so is the European banking sector’s and so is Spain’s. Even if the ECB were to provide unlimited cheap finance for the rest of the decade, it would not be enough. [added emphasis]

In today’s Irish Times a report by Derek Scally in Berlin might suggest an answer

[German] Foreign minister Guido Westerwelle has invited eight EU foreign ministers to the Villa Borsig, north of Berlin, as part of his new “Future Group”. But his officials are already on the defensive, explaining what the meeting is not. It is not about establishing an EU policy avant garde, an official said yesterday, nor was it a likely to produce formal proposals. So what is it? For Mr Westerwelle, it is about moving the European debate, shifting the gaze beyond the day-to-day euro zone crisis.

“This kind of debate is hanging in the air. There’s an expectation that Germany takes on an important role in this debate,” said a foreign ministry official. “This isn’t about a German prescription for Europe being imposed on anyone.” Despite this, and the fact that there is no formal agenda, a Berlin foreign ministry paper proposes discussing integration of EU justice and trade affairs, as well as economic and finance policy.

Debate is likely too on achieving “more democracy” in Europe by strengthening the European Parliament and organising more efficiently other EU institutions.

Of the eight invitees, “foreign ministers from the EU’s five other founding members – France, Italy and the three Benelux states – as well as Denmark, Poland, Portugal, Austria and Spain”, Denmark and France will not attend.

And as Derek Scally goes on to note

The Lisbon Treaty moved European policy largely into the hands of EU heads of state and government at the expense of the bloc’s foreign ministers. Thus there is confusion about how Mr Westerwelle’s initiative sits alongside Chancellor Angela Merkel’s own series of informal dinners.

But at least someone is having that conversation, even if it is only in a secluded villa north of Berlin, because by the fifth instalment…  And, as I may have mentioned, “the political trilemma” remains unresolved [and under-discussed? – Ed].