Yesterday the European Council (the heads of government of the 27 member states of the European Union) started its two days of meetings. It is a very decisive summit as it could either signal the start of a breakup of the EU or the start of a further process of integration.
The financial markets gave positive signals last Wednesday, probably waiting for the conclusions of the summit. The reactions of two key leaders probably sum up the feeling of most persons.
Angela Merkel, the German Chancellor, stated that she is under no illusion that solutions to the crisis of the eurozone, will be found at this summit. On the other hand, the Italian Prime Minister, Mario Monti, stated that, if needs be, the summit should extend to Sunday night, until solutions are found before the financial markets re-open on Monday morning.
In the run up to the summit, there have been bilateral and multi-lateral meetings, which have only served one purpose – that of European leaders holding strong to the positions they have held inprevious weeks.
This has prompted Wolfgang Munchau, a contributor to London’s Financial Times, to claim that the Italian Prime Minister should stand up to the German Chancellor and seek to have truth prevail over German power. He should seek to persuade her that the trade surpluses that Germany is enjoying are thanks to the euro and could be the cause of some of the problems of the other eurozone members.
He should also point out that, over the last three years, the various policies that have been adopted to resolve the crisis have failed time and time again and there does not seem to be any further time to waste.
It is difficult to anticipate what the conclusions of the summit will be this evening. The worst thing that could happen is a fudge. We have had such fudges in the past, such as the idea to borrow using the European Stability Fund as some form of collateral or the idea to expect private investors to pay for the bailout of Greece by writing off their loans. Even the European Central Bank is starting to believe that some short-term fixes have been tested and exhausted. One must also remember that the number of countries that have asked for some form of bailout from the EU has risen to five and include Greece, Ireland, Portugal, Spain and Cyprus.
Therefore, a fudge will add to the uncertainty and will encourage speculators to focus on a big fish such as Italy, which cannot be bailed out as it is too big.
The logical consequence would be for Italy to leave the euro or for Germany to go its own way. Neither are good solutions; except that Germany seems to be willing to take a risk. If Germany is indeed willing to take such a risk, then the words of the former German Foreign Minister, Joschka Fischer, will sound prophetic, when he said that, by allowing the eurozone to break up, Germany would have inflicted devastation on Europe and on itself for the third time in a century.
The ideas that are on the table at this European Council meeting are worth noting. There is a proposal to achieve a closer political union.
However, we can only have political union tomorrow if the eurozone is saved today.
There is the proposal for a form of fiscal union to complement the existing monetary union. However a fiscal union cannot make sense unless there are euro bonds to back it up (something that Mrs Merkel stated there would not be in her lifetime).
There is also the proposal for a banking union, such that controls over banks are exercised at a European level. However, a banking union without a reform of the banking system cannot work.
They are all good ideas that, however, must be supported by concrete decisions and actions.
All this may appear to be irrelevant and distant to those in Malta who are enjoying the European football championships and the antics of a disgruntled soon-to-be former politician. However, Malta is also taking part in the European Council, sitting at the decision- making table and not simply as a spectator on the fringes. Our membership of the European Union and the eurozone gives us this right.
Our national interests will probably place us in different camps on the diverse issues that are being tackled at this summit.
We must take an active role in this debate, clearly proposing ways and means of how to take the European project forward and not allowing a breakup of this very positive thing called the European Union.