I guess it was just a matter of time before the mainstream media and their economist’s discovered what I’ve been indicating for the last four, five months: The European crisis has transformed itself from an economic crisis to a political crisis.
“They cannot even organise a private meeting. How, then, can they solve a debt crisis? The bungling of a not-so-secret gathering of finance ministers in Luxembourg on Friday night provides an object lesson in how the politics of euro zone crisis resolution is going wrong,” Mr. Münchau writes in today’s column in Financial Times.
The drama starting on Friday evening rapidly turned into another political farce, as pointed out by this blogger the same night.
The German news site’s story said Greece was considering leaving the euro zone, and that finance ministers were holding a secret meeting to discuss the issue.
The meeting ended on Friday night with the announcement that there was no discussion on a Greek exit or a Greek restructuring. I very much doubt that this statement – or indeed any official statement on the euro zone crisis – was true either.
The reason for the frantic diplomatic activity is that the euro zone is running out of easy options for dealing with Greek debt.
The core issue in the euro zone crisis is not the overall size of the peripheral countries’ sovereign debt. This is tiny relative to the monetary union’s gross domestic product.
Those responsible have realised that, no matter which debt management option they choose, it will cost taxpayers hundreds of billions.
The political reason this crisis goes from bad to worse is an unresolved collective action problem.
You cannot run a monetary union with the likes of Mr Sócrates, or with finance ministers who spread rumours about a break-up.
This is not a debt crisis. This is a political crisis.
By Wolfgang Münchau
Related by the Econotwist’s:
- Are We Facing A Political Crisis, Too?
- EU Leaders At Non-Excisting Meeting To Discuss A Total Fantasy Which They Know Nothing About
- Greece Consider Leaving Euro Zone, Reintroduce Own Currency
- Greece: Just Do It!
- Time To Get Serious About A Real European Union?
- Why The Monetary Union Is A Failure
- EU Can’t Even Agree On Date For Top Leader Summit
- Anger And Mystery Evolve Around French-German Economic Pact
- Europeans Are Too Depressed To Be Innovative
- EU’s New Watchdogs Warns of Crisis Being Far From Over
- Europe: A Lehman Collapse in Slow Motion, Former Lehman Banker Says
- Greece bailout fails to halt debt woes (guardian.co.uk)
- EU under pressure to revise Irish and Greek bailouts (business.financialpost.com)
- Greece Confirms Participation In Luxembourg Meeting (forexlive.com)
- “it is in a pretty catastrophic situation,” (thepressnet.com)