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.
Wolfgang Münchau
“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.
In today’s column in Financial Times Deutschland, Wolfgang Münchau, makes a summary of what we have learned from Friday’s leak to the Spiegel Online:
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 story also offered the intriguing detail that Wolfgang Schäuble, the German finance minister, had a report in his briefcase warning him of the prohibitive costs of a Greek exit.
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
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The Masters of Lies
The Austrian daily newspaper, Der Standard, describe the eurogroup chief, Jean-Claude Juncker a “master of lies”, in the aftermath of this weekends not-so-secret meeting between the top EU leaders. The newspaper also see Juncker’s handling of the whole farce as “a fatal error that multiplies the scepticism of the citizens.”
“Juncker and his Round Table should be reminded that it was the small states in May 2010 that made the rescue package for Greece possible in the end.”
Der Standard
EU leaders, with Jean-Claude Juncker in the middle at the back.
Criticism is now mounting against eurogroup chief Jean-Claude Juncker for lying about a secret meeting last Friday of selected EU finance ministers in his native country Luxembourg to discuss the worsening Greek debt situation.
A series of furious attacks on the chair of the group of EU states that use the single currency have appeared in the European press over the last 48 hours, arguing that Mr. Juncker can no longer be trusted.
Ministers and their spokespeople across the euro zone had first denied, or refused to comment, on a report which appeared in Spiegel Online revealing that a secret meeting of senior EU officials was being held in a Luxembourg castle to consider a Greek exit from the euro.
The same officials later confirmed that the meeting took place, but that Greece returning to the drachma was never on the table.
Juncker had apparently invited finance ministers from France, Germany, Spain, and Italy, ostensibly under the aegis of the EU members of the G20 (although the UK, a G20 member, was absent), along with Greece, the European Central Bank and Olli Rehn, the EU economy commissioner.
Juncker’s spokesman, Guy Schuller, was quoted by Reuters as saying:
This absurd event comes just a week after the Luxembourgh prime minister admitted the that over the course of his career, despite his Catholic upbringing, he often “had to lie” in order not to feed rumours and that economic policy was too important to be discussed in public. “I am for secret, dark debates,” he quipped, according to an EUobserver report.
German press agency DAPD quoted him as saying:
“When the going gets tough, you have to lie.”
On Monday, Austrian daily newspaper, Der Standard, attacked the Luxembourg prime minister calling him a “master of lies,” also complaining that Juncker had invited the larger EU states but not the likes of Austria or Finland and describined the move as “a fatal error that multiplies the scepticism of the citizens.”
“Juncker and his Round Table should be reminded that it was the small states in May 2010 that made the rescue package for Greece possible in the end,” the paper writes in an editorial.
Germany’s Suddeutsche Zeitung states that no one can believe what the EU leaders, particularly Juncker, says any more regarding the stability of the euro zone .
“Seldom have we seen politicians acting as irresponsibly as they did on Friday evening. In Berlin, Brussels, Paris, Rome and Luxembourg, officials were silent, deceptive or just plain lied,” the paper thundered.
“Who in the future is supposed to believe that Greece isn’t interested in leaving the euro zone if Luxembourg Prime Minister Jean-Claude Juncker, who heads the Euro Group, is taking the lead on the deception?” the German paper writes.
A frustrated European diplomat told EUobserver the handling of the meeting was “amateur.”
Adding: “What happened is silly. How is anyone going to trust what we say now?”
Meanwhile, Greek authorities are going after Spiegel Online for reporting “false news” about Greece considering withdrawal from the euro.
The Greek prosecutor has contacted German counterparts, requesting assistance in tracking down those responsible at Spiegel Online for the initial report.
On Wednesday, European Commission President Jose Manuel Barroso is to visit German Chancellor Angela Merkel to discuss the Greek conundrum and EU Council President Herman van Rompuy will also be dropping in on the German leader to consider the next steps in the crisis.
This meetings will not take place in secret in a Luxembourg castle, but in Berlin – and will be official – at least that’s what they say…
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