European Debt Crisis

Euro crisis not over yet

Stephen Beard Dec 9, 2011

Kai Ryssdal: And yes, here we go again. The umpteenth emergency European summit meeting. The umpteenth plan to save the single currency. The usual confusion over what it all means.

And so we turn to our man Stephen Beard in Brussels. Hello Stephen.

Stephen Beard: Hello Kai.

Ryssdal: So I know I’ve asked you this before in different contexts, but did this meeting save the euro?

Beard: No. At least not yet. Of course, the European leaders here are bigging it up and saying this is a masterpiece. Angela Merkel said it’s a major breakthrough. But here’s how a Belgian member of the European Parliament, Guy Verhofstadt, dsecribed today’s result:

Guy Verhofstadt: While it is certainly a step in a good direction, because they are putting now fiscal discipline inside a treaty. But I don’t think you can say that we have already saved the euro or the eurozone.

He says until we see the European Central Bank acting like the Fed, being prepared to pump vast amounts of cash into some of these most-heavily indebted countries, we won’t see the eurozone finally safe and sound. And he says there’s nothing really in today’s deal which makes this likely to happen soon.

Ryssdal: Well explain that a little bit: What, in the simplest terms possible, is in this deal and who exactly has agreed to it?

Beard: OK, well in a nutshell, 26 EU member countries have agreed to allow their national budgets to be supervised centrally by the European Commission here in Brussels, and for each country to suffer a penalty — a fine — if they overspend, if they start getting too heavily into debt. Twenty-six members of the EU have in principle signed up to this; Britain, the 27th, is the only holdout.

Ryssdal: Why? What’s their sticking point?

Beard: In a sense, Britain is playing its traditional role of being a thorn in Europe’s side. Britain is the country that is always most sensitive about anything that looks like an erosion of its independence and sovereignty.

Ryssdal: It reminds of that newspaper headline from the ’30s or ’40s: Fog in English Channel, continent cut off.

Beard: Absolutely. In this case, the eurozone has been cut off.

Ryssdal: So where do we go from here, Stephen? What happens come Monday morning?

Beard: Sadly, it seems likely the crisis will continue — but at a more muted level. In other words, this won’t have been the summit to end all summits. It won’t in itself deal with the debt piles of Italy and Spain. The euro seems very unlikely now to blow up and disintegrate completely, but they will surely be more panics and alarms.

Sony Kapoor of the think tank called Re-Define says the missing ingredient in all this is growth. Without economic growth, these heavily indebted countries will continue to struggle to pay their way.

Sony Kapoor: It is remarkable to me how little conversation there is on growth in all these discussions. It’s primarily austerity, austerity, austerity. What we need is a credible growth plan, which is completely missing.

And a worrying indication today of declining growth in Europe: Germany, the great economic powerhouse, said its exports fell in October by 3 percent due to shrinking demand in these heavily indebted countries, in southern Europe.

Ryssdal: And the euro story continues. Stephen Beard in Brussels for us. Thank you Stephen.

Beard: OK Kai.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.