With the din of the debate on what the new EU anti-Crisis ‘agreement’ means in our ears, and after a long night of anxious observation of our leaders’ deliberations, it is terribly easy to lose sight of the only truth about this new twist in the euro crisis saga: There has been no agreement to speak of.
Europe had committed to providing a grand solution to three related problems: Its collapsing banking sector, the problem with Italian and Spanish public debt (and their potentially catastrophic effects on France’s triple-A rating), and the derelict Greece economy. Not one of these was even remotely tackled last night. The banking sector required aggressive, compulsory recapitalisation at a central European level. It will not happen. (Not only is the sum set aside to feeble but, primarily, the bankers will be given multitude chances to wriggle out of losing control over their bankrupt banks through various means that will render recapitalisation a dead letter.) The EFSF-on-anabolic-steroids (which is what its private capital leveraged version will turn it into) that has been announced will neither lessen the burden on Italy (nor remove the dark clouds over France). Lastly, the Greek haircut is a mere empty shell of a number (50% is the rule of thumb agreed on in the early hours of the morning, just in order to have a number) since it is predicated upon a series of ludicrous assumptions and deals that deals with the bankers that politicians are nowhere near completing.
And thus the Crisis will continue along its current path, overcoming the eurozone’s last defences on its way to the latter’s disintegration. In short, those of us who stayed up watching and listening, with our antennae trained toward Belgium, simply wasted a good night’s sleep.