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Can-do and won’t-do at loggerheads in battle for eurozone

Ireland and Spain are heroic euro fighters while Germany puts eurozone at risk

Spain and Ireland are the euro fighters emerging from the smoke and debris of the financial crisis. No sacrifice is too great to meet the stiff requirements set by Brussels and central bank bosses in Frankfurt.

Spain’s economy minister, Elena Salgado, was in resolute mood on Tuesday when she said: “A rescue is totally out of the question.”

Her positive stance seems to reflect a strong belief that Spain can escape its debts and live to breathe again within the euro. Madrid has already set in motion the sale of 30% of its national lottery for a return of about €9bn. The airports operator AENA is next, to be followed, separately, by the biggest airports.

Salgado has looked at the industries that make up the Spanish economy and decided there is enough that is modern and competitive to drag the country away from the abyss.

Clothing, renewables and tourism are all world beating. It has strong links with South and Central America and a set of major banks that have (so far) withstood the worst that the credit crunch could throw at them.

Ireland has similarly made a break with the laggards, becoming a major target of inward investment as fund managers take the view it can grow its way out of trouble. It has a strong pharmaceuticals industry and can boast fast-growing hi-tech exports.

Significantly, Dublin won the battle to keep its ultra-low corporate tax rates, despite France’s best efforts, and also cut public-sector and middle-income pay and benefits severely.

It is nasty medicine, but the population has swallowed it, and there is hope of paying creditors and re-establishing a flourishing economy.

But two success stories, if that is what they eventually become, cannot safeguard the euro.

Italy is weighed down by manufacturing industries that are tired and waning. It is a huge exporter, sending out almost a third again as much as the UK to the rest of the European Union and beyond, but competes head on with the Chinese in white goods, textiles and heavy industries.

It also faces huge resistance to reform from across the public sector. Portugal and Greece are in the same boat. They cannot afford austerity, whether it is morally right or not. Some German politicians have argued that bailouts should come with a guarantee from recipient countries that they will quit the euro.

According to the eminent economist Charles Dumas, it is the “fallacious and malignant policies” of Germany’s chancellor, Angela Merkel, and her finance chief, Wolfgang Schäuble, that have poisoned the eurozone.

He said: “It would be nice to compare Merkel’s defiance of market forces with John Major’s in 1992. But that comparison is too flattering – hers is the stubborn folly of the sound-money men of the early 1930s. And we know where that led.”

Brussels will point to Ireland and Spain as proof that austerity works but they are not the focus of global fears: Greece, Portugal and Italy could each bring down the euro on their own. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds