Leading article: More than just a bailout plan for the eurozone

There are pitfalls beyond counting to be navigated around in the coming weeks

Share
Related Topics

Amid the complexities of haircuts, tier one capital ratios and special purpose vehicles, it is easy to miss the momentous significance of the latest eurozone agreement. But momentous it is – not so much for the resolution of the euro crisis as for what it says about the future of Europe itself.

As regards the specifics of the deal, it is as well to be realistic. That the plan only emerged after marathon negotiations far into the night is testament to the difficulties involved, both politically and economically. The agreement that finally came may not be quite the "comprehensive solution" touted by some European leaders last week. But it is the most far-reaching yet and should be welcomed as such. It is also considerably better than the stalemate that seemed to be looming as the talks stuttered and overran. Most striking is the response from global investors. Already buoyed by tentatively optimistic expectations, stock markets rose around the world yesterday morning, Italy's bond spreads dipped, and European bank shares soared despite the proposed 50 per cent writedown of their holdings of Greek debt.

That said, with vast swathes of crucial details still to be hammered out, it will be weeks before the effectiveness of the plan can be fairly gauged. It is one thing to talk airily of so-called "haircuts" for Greece's lenders, for example. How exactly the writedowns take place, since they remain at least nominally voluntary, is as yet unclear. Similarly, the plan to jack up the European Financial Stability Facility beyond €1 trillion is, ostensibly, a marked achievement. But putting into practice the proposals to use the existing EFSF as an insurer of eurozone government bond sales, while tempting foreign backers to put money into a parallel fund, is a task at which all but the most desperate would baulk.

In short, there are pitfalls beyond counting to be navigated around over the coming weeks and months. More concerning still, unless southern Europe can return to growth even the newly expanded bailout scheme will fall short and need a revamp. But none of the caveats, uncertainties and unanswered questions can detract from the historic shift that took place at this week's summits.

George Osborne is not alone in identifying the "remorseless logic" of fiscal union as a corollary of the single currency. But while eurozone leaders were still cavilling at the political cost and moral hazard of standing squarely behind the debts of their counterparts, there was no guarantee that any logic would be followed. As yet, there is still nothing concrete. But there has now been ground-breaking discussion of sharper fiscal surveillance, monitoring of members' budget execution, and a first report on mechanisms for closer union is to be produced by the EU President by Christmas.

Britain's Eurosceptics may cheer such developments. But the row between David Cameron and Nicolas Sarkozy last Sunday is instructive: the French President's very public umbrage at Mr Cameron's attempts to "interfere" in eurozone-specific discussions is just the first sign of the ground shifting. The Prime Minister talks confidently of Britain repatriating powers in return for treaty change, while maintaining a strong voice on EU-wide issues such as the expansion of the single market. In reality, UK influence cannot but be diminished.

The latest bailout deal will not solve the euro crisis on its own. Although the economic storm clouds may have lightened, they are far from dispersed, and the impetus of this week's fraught deal-making must be maintained in crunching through the details. But with progress towards a "two-speed" union now unequivocally begun, Europe will never be the same again. And neither will Britain's place within it.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Bookkeeper

£23000 - £26000 per annum: Recruitment Genius: This small, friendly, proactive...

Recruitment Genius: Photographic Event Crew

£14500 - £22800 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Software Developers - .NET / ASP.NET / WebAPI / JavaScript

Negotiable: Recruitment Genius: A Software Developer is required to join a lea...

Austen Lloyd: Corporate Tax Solicitor - City

Excellent Salary: Austen Lloyd: A first rate opportunity to join a top ranking...

Day In a Page

Read Next
 

After Savile, we must devote our energies to stopping the child abuse taking place now

Mary Dejevsky
A ‘hugely irritated’ Sir Malcolm Rifkind on his way home from Parliament on Monday  

Before rushing to criticise Malcolm Rifkind, do you know how much being an MP can cost?

Isabel Hardman
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower