The summer holidays of most European leaders have been disrupted.

David Cameron had to rush back from his holiday in Tuscany to take charge of the situation after last weekend’s Tottenham riots that threatened to engulf other British cities.

He also got his ministers and MPs back from their holiday by the first flight available for Thursday’s meeting of the House of Commons.

Nicolas Sarkozy, who was enjoying a quiet holiday with his pregnant wife Carla Bruni-Sarkozy, had to rush back because of fears and rumours that France was next in line for a downgrade of its AAA status after the US.

Angela Merkel continued unperturbed with her walking holiday in the Italian South Tyrol region.

Silvio Berlusconi, looking more haggard than ever, pushed this way and that by his economic troubles and a ‘fin de regime’ atmosphere, got his Parliament back from its holiday to approve a series of austerity measures that have still not been completely spelt out to the Italian public.

That’s summer 2011 in Europe – a summer of heightened tensions, increasing spreads, turmoil in the markets, cliff-hanging and doomsday scenarios that are averted at the last minute by impromptu schemes and solutions.

Meanwhile, what the EU leaders agreed to at the exceptional July summit still requires the 15-eurozone parliaments’ ratification to come into effect. No Parliament has yet ratified the agreement and the EFSF fund set up some months ago is still at its initial small size and quite unable to cope with any increased stresses caused by the markets. Our Parliament is still set to resume on 3 October and, as seen above, other parliaments have indeed been made to meet during the holidays but not on the EFSF agreement.

Fortunately, the markets are on holiday as well and no sustained attack has been mounted on Greece, Italy, France or any other country in trouble. Fortunately, the ECB, departing somewhat from its remit and its tradition, has been liberally plugging the gap and thus limiting the damage.

The world at large can only gawp at the enormity of the crisis in the US, a crisis that is beyond imagination as to its contours, dimensions and impacts.

The world’s economy is slowly grinding to a halt, and what looked, as recently as last year, like a quick exit from the recession now looks more like heading into what many feared – a double-dip recession.

There is enormous debate out there on the right tactics and strategies that should be adopted and, while instructive, they question the stability of the euro, its genetic faults and defects and whether the euro can survive.

Generally speaking, it does seem that many agree that the break-up of the euro would be very traumatic not just for the concept but also for the peoples in the eurozone, but many also agree this is still a distinct possibility. Many agree the only way for the euro to survive is for a more federal Europe to take over, with more oversight of the recalcitrant countries, linking up more and more to the leadership and traction of Germany and the ‘virtuous’ North.

That would leave Britain increasingly outside the eurozone but this does not seem to worry the British – on the contrary, Chancellor of the Exchequer George Osborne seemed to welcome a more federal Europe – even though Britain would not be in it.

There is also debate on the validity of austerity becoming the main policy line for the coming years. Over the past days, The Guardian has been running a series of ‘from Ground Zero’ articles from the streets of Greece. The austerity there is now biting – people out of a job, people working two days a month, people thrown out of their homes and having to live with their parents, people with top university degrees taking up menial jobs to survive…

There is fear, too. Fear of losing privileged status, such as led the taxi drivers to strike for three weeks because of the government’s plan to liberalise the sector. Fear that has led thousands of Greek investors to pull their money out of the banks. Fear that is being fomented by extremists that can lead to political consequences in the future.

Now we have an as yet unclear austerity in Italy too. Many things are still hazy but it does seem that at some point President Napolitano and new ECB head Mario Draghi sat Berlusconi down and spelt out to him what an Italy forced to take on ECB funds or IMF medicine would have to do. As a result of this shock therapy, Berlusconi quickly accepted what his finance minister, Giulio Tremonti, had long been saying and got the Parliament around to sign on.

Many have said that it was the austerity measures implemented by David Cameron and George Osborne that caused last week’s riots but that, of course, is rubbish. The hoodies on the streets were taking advantage of police inability to deal with mobs, something the Bobbies had always been quite able to cope with, until they started to take police out from the streets and rely on CCTV cameras instead.

On the one hand, of course, the Greek protesters in Syntagma Square, like the Spanish ‘Indignados’ in Puerta del Sol, are right to say that they did not cause the crisis and should not be the ones to pay for it. They are also right to say that it was the banks (and many times banks from other countries) which were reckless with their investors’ money), which caused the crisis and they do not seem like being the ones to have to pay for it.

On the other hand, there is a growing acceptance that countries should try and balance their books and that heavy debt loads are bad for anyone and everyone, just like recurrent public finances deficits create a bad economic climate. After long years of Keynesianism, the world’s economic thought has shifted 180 degrees.

Still, had there not been this almighty economic, social and political crisis in the US, Europe would have been much better. In a way, the crisis in the US is a mirror-image of what is happening in Europe; but in other aspects, it is profoundly different.

The eyeball-to-eyeball confrontation between Obama and the Tea Party hardliners, who were ready to lead to a default at least on state basis, has to do more with internal American politics than with an economic debate. I remember that months ago, right at the beginning of the crisis, I had written that Obama’s policies would not work. I was very much in a minority then and many people wondered if I had had a touch of the sun. But now it is getting clearer that for all the Quantitative Easing Number 1 and then Number 2, for all the money that has been spent (and trillions are simply impossible to conceive) any growth there has been anaemic at best.

Again, the situation might have been much better than it is now had the rest of the world, led by the BRICS, whose growth looked solid and formidable just a few months ago, blossomed while Europe and the US sank into crisis. But the BRICS very surprisingly suddenly softened and decelerated.

There are enough reasons for this, and this is turning out to be a learning experience for the entire world, because the world is demonstrably far more closely-knit than we ever imagined it to be. Also, it’s either the whole world that is to survive and come out of the crisis together or no one will. This is not Argentina on the brink of default, or Japan in recession – it’s the entire world.

All the world, it would seem, except Malta, the sunny island, where the only complaints of people seem to be Arriva’s disastrous debut, the heat, the priests’ guilty verdict, apart from the usual partisan bickering.

At every opportunity the government says that Malta is the exception in crisis-burdened Europe and in many ways this is true – unemployment is down, jobs have been created, the numbers of tourists increase each month, and the public finances are under control.

But surely if things go bottom-up in our core markets, it will sooner or later affect us as well. It is true that neighbouring Cyprus looked very much like Malta in the past years, with a better GDP per capita, and it is also true that it had to be a tragic accident that wiped out one of its power stations and a huge chunk of its GDP, and which has caused so much hardship over the past weeks. But then, when push came to shove, all the bits that were not quite right in the country and its economy came up to the surface and political unrest is the result.

One of the most reassuring factors in present-day Malta is that its government – for all that it got Arriva wrong, that it was at fault for the €500 a week increase it gave to ministers, for all its fixation on glory projects, etc – is one that is not afraid of tackling issues head-on while the alternative government repeatedly takes the easy way out and goes for what sound bites may make the government more unpopular.

Again, consider Europe – Greece has a government that was elected to reinforce the assistentialist regime put in place by the present prime minister’s father but which found it had to fight a situation that has forced it to implement draconian austerity measures. Spain has a government that was elected to reinforce a more liberal and egalitarian policy stance but which found itself fighting a huge construction bubble and the impending collapse of many local banks.

Portugal too had a government that was elected to further the socialist ways of running the economy but which quickly had to mend its ways and adopt measures that removed the obstacles of growth. The latest word from Lisbon is that the worst seems to have passed.

The Irish changed their government and the new one, like the old one before it, got hit by the crisis, took action that cut through the nexus of the problems and which, even if it brought in hard austerity, seems to be working.

Italy is precisely in difficulties because for all its government rhetoric on liberalization and the business class, it has done nothing over the past years to restore competitiveness, foster growth, remove the assistentialist mentality in the south and cut down on government excesses (to which add the excesses of the provinces and the regions). Hopefully, they will now be addressed.

Again, where is Malta in all this? The government is still struggling to repair the Air Malta damage and the recent Budget pre-document seems to have promised much more of the same. The pleas and urgings from the Commission once again, and by the past Governor of the Central Bank, for public finances to be put on a better footing, to address issues such as pensions, etc seem to have fallen on deaf ears. It would seem the government is relying on growth to remove the need for austerity measures. On the other hand, however, the country knows it has a government that is not as afraid as its alternative to take steps if they are needed.

Hence the summer lethargy, the hedonist atmosphere, the laid-back beach attitude. The others may miss their holidays this year, our holidays are untouched.

Happy holidays.

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