The beauty of technocrats in government is that they have no fear of saying what needs to be said. The latest person to do that was Italy’s Prime Minister Mario Monti. Speaking ahead of a meeting held yesterday with the leaders of France, Germany and Spain, he said that failure in Europe to agree on joint action will “encourage market attacks on European economies”.
His comments come in the wake of comments last week made by German Chancellor Angela Merkel, who called for greater European integration – both on a political level and a fiscal and financial level.
In his comments made yesterday, Mr Monti predicted “progressively greater speculative attacks” without unified action from all the eurozone members. He was speaking just prior to Spain’s expected formal request for a partial bailout of its banks.
While Mrs Merkel has lost her political partner, Nicolas Sarkozy, she seems to have found a new ally in Mr Monti. In comments published in European newspapers, Mr Monti said that, without a credible plan, “the frustration of the public towards Europe would grow”.
He said market attacks would target those who had failed to respect EU guidelines and would include “harassment of the weaker countries”.
He spoke of the need for “ever more integration” for European economies to emerge in “good shape” from the debt crisis. It largely echoes what Mrs Merkel had said, which was also followed up by IMF head Christine Lagarde, who said that eurozone countries were undergoing “acute stress” and must tie their economies together much more closely if they wanted to tackle the crisis.
“The IMF believes that a determined and forceful move towards a complete European monetary union should be reaffirmed in order to restore faith in the system. Because as we see it at the moment, the viability of the European monetary system is questioned,” Ms Lagarde said.
She also recommended that the eurozone help troubled banks directly and relax some austerity conditions for countries in trouble – ideas that have been resisted by Germany.
When asked what Germany would think of her proposals, Ms Lagarde replied: “We hope wisdom will prevail.” But will wisdom prevail? It is becoming abundantly clear that Greece is absolutely stuck in the mire. If Germany continues to insist that Greece is bound by such harsh austerity measures, its economy will simply not recover – there is no way it can do so with the amount of restrictions which it is facing at present.
Germany argues that it cannot bankroll the whole eurozone, and we agree. We also agree that Portugal, Ireland, Greece and in the very near future Spain, will have to pay back what they have borrowed. But continuing to press for something which cannot materialise – in terms of payment – will only succeed if the economies themselves are given the space to grow.
It is true that the eurozone cannot continue to function in its present format. It is equally true that the European Union cannot continue to function in its present format. But on the other hand, we must also recognise that half-baked solutions and hollow consensual ‘agreements’ will not get us anywhere. Concrete action is needed.