Leader: Euro-zone compromises will no longer do
IT DID not take long for the faint hope sparked by the election in Greece to fade and for harsh, even bleak, reality to take hold again.
The brief surge in optimism generated by the defeat in Greece of the radical Syriza group was dashed in the markets yesterday with bank shares falling across Europe, even as the right-of-cente New Democracy party entered talks to form a pro-EU coalition with the socialists of Pasok.
Yet as attention continued to focus on Greek politicians’ attempts to form a government, arguably a more significant development was taking place across the Mediterranean, with Spanish government borrowing costs rising to a euro-era high.
In terms of where the European financial crisis is leading, this development was of far greater significance than the formation of a Greek government and the expected agreement between it and the EU to stand by the austerity plans, albeit with the terms slightly modified to allow the new administration to claim it had won concessions from Brussels and Frankfurt.
Spain is not just the next, routine, problem for Europe after Greece. It is a problem on an altogether greater scale. Remember, experts warn the 100 billion euro bailout of its banks will not be enough to secure its economic future. The fact that such an amount, unimaginable to most people, is inadequate puts this crisis vividly into perspective. So what next?
As former prime minister Gordon Brown points out on these pages, as the costs of borrowing rise in Spain, the debt dynamics become unstable, and the country will soon face “a funding crisis that will require either large concessionary financing or debt write-downs”. When that happens, Mr Brown warns, there is only one institution inside the euro-zone which can step in, the European Central Bank (ECB).
However, as Mr Brown also points out, the bank as currently constituted is not a lender of last resort for the euro area, which he rightly identifies as a fundamental flaw in the currency union he played such a pivotal role in keeping the United Kingdom out of.
If that is the problem, what is the answer? At their G20 meeting in Mexico, world leaders have to apply pressure on German Chancellor Angela Merkel to allow the ECB to become the lender of last resort, a move which would shore up the euro and, possibly, prevent Greece’s exit from it. If Mrs Merkel will not accept that, and there is little sign she will, then the moment of truth cannot be avoided. Greece and perhaps other countries like Spain, Portugal and Italy, may simply have to leave the euro with the catastrophic consequences for them, and for countries like the UK who trade with them.
Time is running out. The fudges, obfuscation and compromises which have characterised the so-called action taken on the euro-zone will no longer do.
Need to confront reality
There are few issues which provoke more powerful emotions in Scottish politics than the stationing on the Clyde of the submarines which carry the United Kingdom’s nuclear deterrent.
Whether you agree with it or not, there is a long and honourable tradition of anti-nuclear protest in Scotland since the early 1960s when the US Navy first established a submarine base on the Holy Loch.
Today the plans by the current UK government to replace the Vanguard fleet have prompted a new debate, equally as heated as any that went before, and given added piquancy by the prospect of an independence referendum.
Yesterday, the disputes intensified, with senior Liberal Democrat Sir Menzies Campbell claiming there was an assumption in the UK government that Scots will not vote “yes” to in-dependence and therefore there was no planning being done for this scenario.
Sir Ming is either ill-informed or, in the name of the Union, refusing to confront reality. For if Ministry of Defence civil servants are not planning for this, and we believe they are, they would be guilty of a gross dereliction of duty.
Proper debate is not helped by assertions like Sir Ming’s, on one side, and those of the SNP on the other. The Nationalist claim an independent Scotland would inevitably be non- nuclear is equally illogical. Why? Is that not a matter for the government of a newly independent Scotland?
What needs to be made clear is that the coming referendum on independece is not a referendum on nuclear weapons and should not be treated as such.
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Tuesday 21 May 2013
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