The half life of joy and celebration, following Europe’s Summits, is continuing to slide. The 19th such Summit since the Crisis erupted was, as I wrote here, the most successful (in that it produced, for the very first time in two and a half years) a decision that is not wholly fraudulent, irrational and irrelevant. It was, in effect, a first, important step toward decoupling the insolvent banks from the insolvent states. However, already, the politicians of the surplus nations are clawing back the encouraging elements of this decision, after having buckled in front of the Latin troika (the spontaneous alliance of Italy, Spain and France). It is, thus, no surprise, that the post-Summit’s enthusiasm’s half life proved no longer than three days.
To get this agreement the Latin troika traded progress on growth and the financing of member-states that find it impossible to refinance themselves. For what exactly? The Netherlands are asking for a Treaty change, in order to permit the ESM to inject capital directly into banks. Finland continues to demand collateral – an act of determined refusal to behave like a prospective member of a closer union. Germany’s CSU is threatening to bring Mrs Merkel down over the same issue. The German constitutional court is waiting in the wings. Greece, Ireland and Portugal are frozen out of this agreement by some remarkable argument in favour of double and treble standards. The vagueness over the timing of, and conditions for, the direct capital injections are threatening to turn this singularly good idea into a dead letter. In a sense, the Latin troika secured an agreement that may be confirmed in the total breach rather than the implementation.
The most telling aspect of it all is the attitude of those critical of Mrs Merkel’s concessions to the Latin troika: Their take on it makes it spectacularly clear that they do not wish for the bank run in the Periphery to end or for the Periphery’s states to see spreads fall to manageable levels. Ergo, they are more than happy to see the eurozone perish. It is little wonder, then, that the markets have gone back to their pre-Summit gloom.
