Opinion: Eurozone direction still not clear
Monday, June 25, 2012
London Evening Standard on the Eurozone crisis:
The eurozone crisis had a temporary reprieve before chaos returned to the markets because of renewed uncertainty, this time about Spain. There was initial relief about the results of the Greek election, which saw the New Democracy party, which is willing to accept an austerity deal to remain in the euro, get three per cent more of the vote than the radical Syriza party. That translates into far more seats in parliament for the winning party, enough for a coalition with the socialists.
Meanwhile, the French socialists' victory in parliamentary elections should give us pause. Following François Hollande's win in last month's presidential election, last week's results give him huge power. He should have little difficulty getting his tax-and-spend policies passed. Hollande is committed to reducing France's deficit, but the program for doing so has been extended to 2017. In addition he is fulfilling campaign promises to reduce the pension age in some sectors and hire 60,000 more teachers.
But where does this leave the Franco-German alliance? The German chancellor, Angela Merkel, is clear that a long-term resolution of the eurozone crisis lies in a fiscal union which would require all economies in the single currency to harmonize their fiscal policies and budgets. The French president would appear to have other plans. How will Merkel's plans for a fiscal union for the entire eurozone work if even her closest partner has quite different objectives?
Both Merkel and Hollande are pragmatists and may square their different priorities. It's not going to be so easy for the new Greek government to get its way with Germany. ...
For now, a chaotic breakup of the euro has been averted — but perhaps only postponed.