Twenty days that may shake the Eurozone
ARTICLE | APRIL 24, 2012 - 1:12PM
In the Eurogroup meting of 15 May, there will be a deep
re-shuffle of the entire Eurozone's strategy to counter its sovereign debt and
bring the euro area in a long term growth pathagain. The new factors for
this possible re-orientation of the monetary zone's strategy will be the
results of the French and the Greek elections of 6 May.
Of equal importance for the future of the Eurozone are the
prospects for the formation of a viable government in Holland, after the
extreme right anti-European Freedom Party of Geert Wilders withdrew its backing
to the minority government of the Mark Rutter, thus opening a new period of
uncertainty in the second largest surplus economy of the euro area.
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Incidentally, it must be noted that
the strengthening of the xenophobic ultra right parties in Europe, like the
Dutch Freedom party and the French Front National, are developing a growing
anti- European dynamic and favour a re-nationalisation of crucial EU policies
like the Schengen Agreement, a treaty that “created Europe's borderless
Schengen Area, which operates very much like a single state for international
travel with external border controls for travellers travelling in and out of
the area, but with no internal border controls”.
In any case, what is now at stake is
not the Schengen area but the Euro area. And the Eurogroup of 15 May will
probably change Eurozone's prerogatives as we knew them, under the spell of the
tight Paris-Berlin axis and the support of Holland favouring the unity and the
North-South consolidation of the Eurozone at any cost. Of course, the nuclei of
this strategy are not in danger. The reaction of the capital markets on 23
April - in view of the news from France and Holland - did not question the
value of the euro vis-a-vis the dollar and losses were restricted to the
variable by nature stock markets. In fact, the very next day 'bourses' gained
some of the lost grounds.
So, what will really happen in the
15 May Eurogroup meeting?
France and Holland
France and Holland have in common a
rather ground braking tradition. One must recall that those countries
sequentially 'killed' in two consecutive referendums the treaty for a 'European
Constitution', and sent the EU on the long road that led to the watered down Lisbon
Treaty.
In France, however, a possible win
of the socialist Frascois Hollande will not question the basics of Eurozone.
Traditionally, France has been longing for more, not less Europe. In reality,
what Hollande means but refrains from stating so in his electoral rhetoric, is
that he does not question the need for the new Fiscal Pact but he wants an
addendum to it providing some more tools for growth, even as a kind of lip
service to the European audience. So, the Eurozone has nothing to fear from
Paris.
As for the Hague, Geert Wilders may
continue playing around with his ultra nationalistic ideas to capture the
imagination and the votes of the xenophobic voters, but in reality, he will
never have the political guts to question the Eurozone's construction. Given
that a lot of jobs in Holland are depending on this, his audience will never
accept an open anti-European narrative. Thus, Dutch politicians may be in
difficulties over the next months to form a viable government, but as in
Belgium, this will not obstruct the country from fulfilling its European
obligations. Unfortunately, this is not the case with Greece.
Greece
In Athens after the 6 May elections,
the political scenery will most probably provide for a possibility of a
coalition government between the centre right New Democracy and the socialist
Pasok. Both those parties guarantee that Greece will continue more or less to
apply the Memorandum of Understanding (MoU), the country singed with its
creditors at the beginning of March. However, the highly unpopular terms of
this agreement provide for so severe an austerity, that actually the economy is
not led to fiscal sanity nor to growth. This fact together with the entire
political and social environment in the country being deeply against the terms
of the new MoU will make the life difficult for the new government.
It will also render it prone to
demand changes of those terms from the troika of Greece's creditors, namely the
EU-ECB-IMF. This said, the new Greek minister of finance in his first
appearance in the Eurogroup on 15 May will not be given even a minute of grace
period and will find himself in a deeply hostile environment. Nobody in that
room, nor the French or the Dutch will help him renegotiate the terms of the
MoU. Understandably, if the Eurozone accepts the Greek demands, then more
countries will also ask for more relaxed terms. In short, it will probably be
Greece again the one of the 17 member states prone to create problems in the
Eurozone.
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