Ambrose Evans Pritchard recasts the noises of support emanating from the G7 meeting in Canada as a shift towards economic government and debt union. Is the support given sufficient to justify this slender interpretation, especially as political support may be misdirection to level off the price of Greek debt.
FINANCE ministers and officials from the G7 countries, meeting in Canada yesterday, insisted there would be a “European” solution to the problems affecting Greece, Portugal and Spain and no need for an IMF rescue.
“We told our partners we had to solve the problem ourselves,” said Jean-Claude Juncker, chairman of the Eurogroup of finance ministers. The difficulties in Greece extended to Portugal and Spain last week, with credit spreads widening sharply, provoking a plunge in local stock markets.
Wolfgang Schaeuble, the German finance minister, said the problems would not undermine the euro but warned that Greece would have to make sacrifices.
“The euro will stay stable: markets always tend to overreact,” he said. “Greece has to realise that when you break the rules over a long period of time, you have to pay a high price.”
Schaeuble's utterances were designed to support Greece's austerity package, not to muster in a new age of European centralisation, as directed by the German taxpayer.
Yet, if this is a radical step towards the institutionalisation of economic planning under the Lisbon Treaty, then this merely displaces the political problem from markets to Brussels. For the Eurosceptic, such a step can be welcomed as a tightening of the project: austerity unleashed upon the Mediterranean states and depression wedded to European unification. Any demos will react to this provocation with strikes, populism and the rise of the left in its nationalist and socialist variants.
The political problems will have been postponed...for a short while. It may even be insufficient to stop the contagion.