We live in the shadow of a volcano.

The euro situation is getting worse by the day and many are already betting that it will not resist imploding.

The crisis last week reached mighty Germany – there are no more frontiers to cross. Maybe, as has been argued, Germany failing to sell bonds in an auction is not new and maybe too there was a technical reason why it happened last week.

But this new fact has continued to spook the markets, which are now in full flight.

All it needs is for France to get a ratings downgrade and all the Sarkozy bluster comes apart. He is already trailing a weak Opposition in preparation for the coming elections, and it is equally clear that with the Socialists at the Elysée, France’s fundamentals will deteriorate (as they do whenever the Left is in power, anywhere).

France and Germany are meanwhile engaged in a futile tug-of-war: France wants the European Central Bank (ECB) to become the lender of last resort, but the ECB has refused and Germany will not have it, since it perceives it to be like telling the countries with deficits to spend and spend again.

On the other hand, Germany insists on treaty changes that the other European leaders shudder even to think about.

The Greeks are still striking and protesting in the streets. Someone who was in Greece in the past days told me that there is real anger among ordinary people. But striking and rioting will only make their situation worse.

As for the others, Portugal is missing its targets despite a change of government. Spain’s new Prime Minister still has to make himself known to Angela Merkel, his companion in EPP. And the Right’s victory was slimmer than one thinks. Rajoy’s party increased its vote by just 0.5 million. The election was lost by the Socialists, whose vote decreased by four million.

Italy’s new Prime Minister is the flavour of the month, but he still has some tough decisions to take and it is fair to expect the unions to come out with guns blazing when austerity starts to impact, even that austerity that was agreed to by all in Berlusconi’s last days. Then there is Bossi’s opposition to many of the proposed austerity measures. And if Monti tackles the cost of politics, he will find Berlusconi’s party against it.

Everything will come together, or collide and clash together, in these days before the European Council of 8 December.

On the one hand, there are the countries in the eurozone who are being pushed and pulled to become more and more Germanic. There is, to be sure, incredible pressure from Germany and allied countries such as The Netherlands to ask for sanctions against countries that are not really pulling up their socks. This is a centrifugal pressure which is leading to a fiscal union.

But this pole of attraction risks splitting the EU even more than it is already split. The non-euro countries are feeling very much left out of things and have begun to meet up, creating their sort of non-euro network. This is however rather dysfunctional – it is one thing being Britain with no intention of ever joining the euro (even though most of British trade is with euroland) and quite another thing to be Poland or other 2004 accession countries which will move to the euro when the euro becomes strong once again.

Time and again, the solutions that successive Councils have come up with as the solution to all the problems keep turning out to be non-starters. Take the latest – the EFSF, which was agreed at the special July summit to be €440 billion but which was supposed to be leveraged to reach around €2 trillion. It can’t do that. At most, it can be twice or three times the initial €440 billion, which is nothing if Italy goes up the spout.

Moreover, the EFSF was meant to start operations in September, then in October, then in November. The latest date is 1 January. Don’t hold your breath.

The rest of the world looks on and considers the cumulative impact of this indecision and conflicting opinions on a continental scale. If Europe is heading for a second, harsher, recession, the rest of the world will suffer too. What used to be called BRICS is no solution to the crisis in Europe. Nor will the Chinese put in money where the Europeans patently fail to put theirs.

Now to look at things on these shores. At last Friday’s Institute for Financial Studies annual dinner at the Hilton, Josef Bonnici gave a masterful exposition on the dimensions of the crisis but his words were lost on the audience. Maybe he has a problem with delivery, maybe the pre-prandial atmosphere was not conducive to an analysis of continental macro-economy. Maybe also people are just refusing to see the wider picture.

They were financial practitioners all, but each seemed to focus on his (or her) small world of banks, financial institutions, competition in a small market. I watched as the Governor’s words were lost to most.

That was a microcosm of the attitudes on a national basis. People just don’t want to know. They are living in the shadow of a volcano but prefer to focus on petty partisan issues.

We lurch from one diversion to the next.

First we had the Budget, but this was quickly submerged under the spin given to it by an Opposition, which focused on everything but the Budget. Then the government, instead of getting the discussion back on the rails, went along and engaged in counterspin (such I perceive to have been the Prime Minister’s speech on Wednesday).

We had just come from the big Arriva and Austin Gatt diversion which engaged national debate for the entire summer.

Now, carefully preparing us for more shenanigans tomorrow week when Mepa will discuss the power station extension, we have this Norwegian wonder that aims to make Malta an exporter of energy. I know a spin when I see one, which is why I refused to go along to the business breakfast on Friday.

If it’s the best invention since jelly tots, why is it still not being used all over the world? If the BWSC plant is a ‘world-first’, what is this? Anyway, I could see fingerprints all over the thing and I know those fingerprints well.

Once again, the focus is all wrong. There is this Opposition fixation to get the rates down. Maybe they can be trimmed here and there and maybe there could be more efficiency in Enemalta’s workings. But do we really think that reducing the bills will do anything except encourage each one of us to return to our wasteful habits of the past?

That is not what the country needs. At the IFS dinner on Friday, Prof. Bonnici came up with his suggestions. Over the past years, his predecessor, Michael Bonello, used to emphasise time again to come to grips with COLA and its implacable effects on Malta’s competitiveness. He was never listened to.

On Friday, Minister Tonio Fenech did not even respond to any of the points made by Governor Bonnici. When I tackled him about this as we were going out, he said that if he had to reply, he would have made an even longer speech than the one made by the Governor.

And finally, we now have all these people who have been there at the centre of national politics and debate for the past years leaving the national stage. Suddenly, they’re off and the stage looks a little bare without them.

On the one hand we have a government that is losing pieces and not replacing them. On the other hand we have an Opposition that comes back with all its walruses while its newest recruits are still waiting in the wings.

That sets the scene for the next Act, but it does not necessarily mean that the country as a whole will refocus on the main issue facing the country – surviving the huge storm out there. Given past experiences, it more likely means we will soon get a new diversion. Or we already have one.

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