How dangerous is the European financial condition? On Monday, while stock markets from the DAX and FTSE to the New York Stock Exchange were up sharply on report of French and German cooperative murmurs regarding sovereign debt negotiations (and on temporary easing of U.S. double-dip recession fears), the financial and political European press were warning of a coming financial crisis of unmatched dimensions.
The ever stiff upper-lipped London Financial Times let loose with uncharacteristic wails of woe: Its five column above the fold front page headline panted: “Time is short for eurozone,” while its editorial page — in a rare single top to bottom of page leader — shouted with a now quivering upper lip: “Save Europe’s unity now.”
Typical of elite continental press, the German Der Speigel, under the headline “Financial Crisis Returns” reported:
“Sovereign bonds were once considered among the safest of all investments. Yet with Greece teetering and several more eurozone countries on the watch list, the continent’s banks are in trouble. The European Union is struggling to come up with an antidote. …The mood was decidedly somber…. Three years after the collapse of the Lehman Brothers investment bank in September 2008, the crisis is heading toward a new peak. The banks no longer trust each other and, during the past week, prices of insurance policies to protect investors in the event that credit institutions go bankrupt have soared to the highest levels ever observed.”
The London Financial Times anchored its reporting with the exclusive comments of the British Prime Minister, David Cameron, explaining that he had urged European leaders “to take a ‘big bazooka’ approach to resolving the eurozone crisis, warning they have just a matter of weeks to avert economic disaster.”
The London Financial Times approvingly reported the prime minister’s call for European (French in particular) bank stress tests, bank recapitalization and building a firewall around Greek debt default by enlarging the firepower of central ‘European financial stabilization facilities’ from about 400 billion Euros to 2 trillion Euros. That is close to three trillion dollars — real money even in multi-trillion, debt-crazed Washington.
The piquancy of the British premier’s advice to the French and Germans was savored in Cameron’s warning that while he wanted the eurozone to deepen its financial integration to avoid crises, he “demanded safeguards to prevent France and other Eurozone countries from distorting the European Union’s single market in an attempt to shift financial services from Britain to the single currency area.”
As Cameron went on to say: “The French wouldn’t have us trying to move their aerospace industry to Poland, so I’m not having them trying to move our financial services industry to Frankfurt — forget it.” The French European Union Commissioner Michel Barnier responded that “I don’t know if I’d quite put it like that,” which is euro-diplomatic talk for a barnyard epithet.
Of course, it is precisely this Anglo-French contretemps — now over a thousand years in duration — combined with the growing and stubborn desire of the various European electorates not to let their leaders and bankers sell them out to other European nations (many of them historic enemies) that is at the heart of Europe’s failure to solve its debt crisis.
As the Financial Times’ editorial argued: “Policies to put funding for Europe’s sovereigns and banks on a secure footing cannot wait. But wait they will until the leaders fill the most serious deficit threatening the Euro. That of trust — between countries and between voters and leaders … Above all, leaders must create the political conditions for good policy … The world beholds Europe and sees a region turned in on itself, whose squabbles pose a global economic threat.”
Admittedly, it is gratifying, as an American, to see our European cousins — who constantly disparage our culture and government — struggle to govern themselves after over a thousand years of practice.
And, of course, the United States — with the advantage over the eurozone of enjoying a unified federal fiscal policy amongst our several states — also does not currently have effective leadership to solve our dreadful economic and related debt problems.
Nonetheless, it is shocking to see what a pitiful, helpless thing a great nation — or continent — can become for lack of competent leadership.
President Obama and Prime Minister Cameron are right about one thing at least — if the Europeans fail to contain their debt crisis, America, Britain and the world will pay a horrible price. The powerful impact of a possible Euro-failure on the world economy is reflected in the fact that world stock markets go up or down 2-to 3 percent on the day over the slightest hint of good or bad Euro-debt news.
If such volatility can be caused by mere rumors, imagine the collapse that would come with the certainty of a failed Euro-debt policy.
Tony Blankley is executive vice president of Edelman public relations in Washington. E-mail him at [email protected]