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Euro crisis: chucking spears at a nuclear threat | Editorial

The eurozone has neither the structures, nor the protocol, nor the will to take the measures necessary to solve the debt crisis

For all the incremental advances and technical details of the euro crisis – a loan to a French bank here, a rise in Italian government bond yields there – the big picture remains the same: the leaders of the eurozone are using spears to take on a nuclear threat.

Sometimes they turn up with enough spears to look curiously menacing. That’s what happened last week when the European Central Bank (ECB) led the Bank of England and other central banks in a pledge to keep the continent’s private banks topped up with dollars. Sometimes the Eurocrats brandish just a few blunt spears and the markets ignore them – as was the case on Friday, when finance ministers gathered in Wroclaw, Poland, and pledged to exert greater budgetary discipline. More recently, the political leadership of the single-currency club have been talking about turning in their spears for a few small nukes – in a couple of years, maybe. And all the while, the growing chorus of voices outside the golden triangle of Paris, Berlin and Frankfurt urges Angela Merkel, Nicolas Sarkozy and their counterparts and officials to go nuclear. Last week it was the turn of US treasury secretary Tim Geithner, plus George Osborne, Alistair Darling and Gordon Brown – all of them urging the democratically elected representatives of the single-currency area to wake up to the gravity (or “catastrophic risk“, as Mr Geithner correctly referred to it) of the euro crisis – and act with commensurate power and authority.

Yet the ministers across the 17 capitals of the eurozone are surely not unaware of the peril their common currency faces. The turmoil in the markets, the rising suspicion with which even big European banks are being viewed, the babel of commentary that now discusses the breakup of the eurozone as a serious possibility: all these register in a Berlin ministry as much as in a trading floor in Canary Wharf. But while the existential threat is obvious, there are sharp divides about how to tackle it.

Put bluntly, the eurozone has neither the structures nor the protocol nor the will to go nuclear. That would mean a co-ordinated effort to sort out the continent’s banks – closing down some and nationalising others. While this is happening, the governments of southern Europe need to write off a huge portion of their loans and get some kind of credit to reflate their stricken economies. In essence, this would be doing what Britain did in 2008-09 – but across 17 countries, some of them broke. The hurdles to such a rescue are so huge that it is hard to imagine such a plan ever being put into action. But that is what going nuclear would mean; anything short of that now will probably not stop the euro from collapsing. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds