When the French and German leaders on Sunday announced they had reached an accord on “a permanent” solution to the eurozone debt crisis it sounded as if they were speaking for all members in the euro club.

There is a realisation that if one sinks, they will all sink

No details of the accord were divulged since these will have to be discussed in the next summit of EU leaders in Brussels later this month, but much as Europe’s two largest economies are expected to take the lead in solving the crisis they can hardly do it alone in a club made up of 17 sovereign states.

With 17 countries sharing a single currency but having no common fiscal policy the eurozone is a complex reality, a glimpse of which emerged last week when Parliament debated increasing Malta’s guarantee to the European Financial Stability Facility.

Labour leader Joseph Muscat said the opposition would be supporting the changes to the legislation outlining Malta’s obligations to the eurozone bailout fund but the support was not unconditional.

Dr Muscat insisted that the opposition had to be consulted before the government committed itself to any more changes in the future.

“The country cannot be extravagant in loans or guarantees to other countries,” Dr Muscat said, adding the country could not give blind commitments.

He also spoke against a eurozone-wide common tax structure but supported the replacement of the bailout fund with a European monetary fund and the introduction of Eurobonds that would provide for a joint guarantee of all 17 countries’ debts.

In Parliament Finance Minister Tonio Fenech was quick to point out that Eurobonds presupposed that a structure leading to a fiscal union had to be set up, including a European treasury and the right to impose taxes.

Mr Fenech said the government was not against Eurobonds but the implications had to be evaluated.

The debate highlighted the conundrum facing eurozone countries: they do not want to give up more power to Brussels but the only lasting technical solution seems to be more integration.

The problem is that the EU is not a single country, like Japan, the US or the UK, economist Lino Briguglio said. “The fiscal authorities in the eurozone are not integrated but there is a realisation that if one sinks, they will all sink.”

This realisation has prompted a host of developments such as the creation of the bailout fund and Brussels’ improved ability to implement enforcement. But an integrated plan to unify finance ministries in fiscal matters has yet to materialise.

The lack of fiscal integration is problematic since it exemplifies the cultural rather than the economic gap between the prudent northern states and the more spendthrift southern states.

Greece and other southern European countries are not as competitive and do not have the same work ethic as Germany, according to Prof. Briguglio. The meaning of fiscal prudence is also different.

“These differences will have to be resolved as otherwise there will always be a recurrent gross imbalance between eurozone members and that is why a unified ministry of finance in the euro area is important,” he said.

In a recent article in the London Financial Times former US Federal Reserve chairman Alan Greenspan described the cultural divide on the lines of a borrow and spend southern mentality versus a save and invest northern mentality. Economist Joseph Falzon, who heads the University of Malta’s banking and finance department, believes this is the “main and crucial difference”.

“Is the south willing to follow the north in its very prudent economic policy?”

But while bridging the cultural gap could provide the permanent solution eurozone leaders have been searching for, there are other issues at stake.

The debt crisis has created a ripple effect with some major European banks feeling the strain of high exposures to debt-stricken countries. On Sunday Franco-Belgian bank Dexia had to be bailed out by France, Belgium and Luxembourg to prevent it from going bankrupt. Despite the lack of clarity over the type of holistic package needed to solve the debt crisis, Prof. Briguglio believes it is “very important” that the EU helps Greece.

“There are many European banks that hold Greek bonds and if Greece defaults it could trigger a chain reaction of bank downgrading and possibly defaults, as well as runs on banks in Greece and other countries,” he said.

This catastrophic scenario would lead to a financial crisis and ultimately to a recession, which governments desperately want to avoid.

“Bailouts create moral hazard but the collapse of the euro creates economic disaster,” Prof. Briguglio said, adding France and Germany had to play a leadership role in all this.

Malta is not a spectator as financial turmoil brews. It is part of the eurozone and like other member states it will be expected to pull its weight. The uncertainty on the path ahead complicates matters but for Prof. Falzon a bigger problem is the lack of information. The government had to give more information about the dealings between Eurozone leaders on the Greek crisis.

“Government has to inform not just the Opposition but also the social partners and other interested persons in financial companies, banks, business, the press and academics by conducting a national conference on the subject,” Prof. Falzon said.

Disseminating information was a noble idea and the Opposition had “a right to insist” that any future changes to the bailout fund should be discussed with it before commitments are made, according to Prof. Briguglio.

However, he also warns that in a fast-paced environment, speed is of essence.

“These things often require speedy delivery and this should also be kept in mind.”

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