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

Senior Data Scientist (Data Mining, RSPSS, R, AI, CPLEX, SQL)

£60000 - £70000 per annum + Benefits + Bonus: Harrington Starr: Senior Data Sc...

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Junior VB.NET Application Developer (ASP.NET, SQL, Graduate)

£28000 - £30000 per annum + Benefits + Bonus: Harrington Starr: Junior VB.NET ...

C# .NET Web Developer (ASP.NET, JavaScript, jQuery, XML, XLST)

£40000 - £50000 per annum + Benefits + Bonus: Harrington Starr: C# .NET Web De...

Day In a Page

Read Next
 

No menu! Dining doesn't get posher than this

Dom Joly
 

Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Ellen E Jones
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model of a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution