Adrian Hamilton: It's unrealistic to expect Europe's leaders to find a big-bang solution

World View: The real moment for leadership and ideas will come at the G20 in Cannes

Click to follow
The Independent Online

It's hard to know whether Lord Wolfson is being merely frivolous or really feels concerned in offering a prize for anyone who can come up with a feasible means of countries to exit the euro. Either way, he's unlikely to pay it out. Or rather, if someone could come up with a simple means of managing the eurozone crisis, he should be awarded $1bn not the £250,000 on offer.

There is no easy solution. Those – who seem to include most of the rest of the world – who keep demanding that eurozone leaders come up with some dramatic package, which will solve all at this weekend's EU summit in preparation for the meeting of the G20 world leaders in Cannes on 3 November, are asking the impossible. It's not that the problem is too complex or that there is some neat technical fix which has somehow eluded the minds of economists so far. It is that this crisis poses a series of imperatives that are basically irreconcilable. Everyone seems to have now decided that the banks in Europe need to be recapitalised if there is not to be another financial crisis on the scale of 2008/9, but everybody also wants them to keep lending and not draw in their horns to achieve it.

The cry is now for growth, but the demands of the market are all for the repayment of debt. Countries from Greece to Italy are being called on to savagely reduce their budgets. Yet the more they do so, the more impossible it becomes for them to earn the money to do so. David Cameron and his Chancellor, George Osborne, call it a crisis for Britain and the rest of the world but immediately turn down any idea that the UK will help through its membership of the IMF.

Meanwhile, Chancellor Merkel of Germany and her finance minister have spent this week damping down expectations for the EU summit this weekend while President Sarkozy has intervened to ramp them up, declaring that "an unprecedented financial crisis will lead us to take important, very important decisions in the coming days".

Perhaps it will but, if I were a market operator, I wouldn't bet on it. The trouble with the idea of once-and-for-all-solutions to the eurozone crisis, as Sarkozy ought to know better than anyone else, is that they involve such staggering sums that no European country could realistically finance them.

The warning by the credit rating agency, Moody's, on Tuesday that it is considering downgrading France's debt is an indication that not even the biggest countries – not even Germany indeed – could actually bail out Italy and Spain without finding their own borrowing costs going through the ceiling.

And that is to assume that they could ever get their voters to accept such a commitment, which they almost certainly would not. Merkel and Sarkozy, who are both facing re-election in the coming year, may talk the talk but they know perfectly well that, when it comes to the ballot box, self-interest usually triumphs over high ideals. Instead, what the finance ministers discussed with such gravity and secrecy earlier this month in preparation for this weekend was a bit of everything. They agreed to leverage the existing hard-fought bailout fund to a trillion euros but not actually increase it, call on recapitalisation of their banks but leave it to the markets to enable it to happen and laid ever more burden on the European Central Bank to move beyond its remit in buying up sovereign debt.

The big-bang solution won't happen because it can't, and maybe shouldn't. Merkel is right in what she said this week. It's time to lower expectations.

Muddling on may not be the noblest of solutions but it is all you're going to get from Europe. The real moment for leadership will come when the world leaders of the G20 meet in Cannes. The eurozone problems however dramatic in market terms are just part of a far bigger crisis now.

Tunisia was the first country to unseat a regime in the Arab Spring and it will be the first nation to hold elections when voters go to the polls this Sunday.

It's as easy to be cynical as to be over-enthusiastic. Tunisians abroad as well as at home have to choose between 81 new parties to elect a Constituent Assembly of 217 members which will prepare a new constitution for full elections within a year and appoint an interim government to run the country in the meantime.

With so many parties and with so little experience of democracy, it is hardly surprising that voter registration has been low at some 55 per cent, while progress towards this moment has been slow and, for many, too reluctant to make a clean sweep of the old regime and all its cronies.

But the fact is Tunisia has got where it is relatively peacefully. The vote – in a major breakthrough for virtually any country – is genuinely gender-equal. All parties must field a list of equally numbers of both sexes. It may all be somewhat inchoate. But then that is what makes it and the Tunisians so interesting and so admirable.

a.hamilton@independent.co.uk

Comments