BERLIN — It's the big euro reform engine that couldn't.
Nearly a decade after Greece descended into financial chaos, unleashing the worst economic crisis Europe had faced since World War II, a conclave of the eurozone's finance ministers (17 men and two women) agreed early Tuesday morning after an all-night session what they've proved most adept at — a hodgepodge of technical initiatives.
Wading through the fine print of the proposed reforms of Europe's single currency bloc is a bit like trying to decipher the revised terms of an airline's frequent flier program. At the end of it, the reader is left to wonder what all the excitement was about. That it took the ministers all night to agree on a modest set of changes speaks more to the division within the currency bloc than its unity.
The finance ministers went into the meeting in Brussels on Monday after marking the 20th anniversary of the euro in a jovial photo-op. But by the time they re-emerged some 18 hours later with bags under their eyes, they had managed only to grab what eurozone diplomats had long billed as "the low-hanging fruit" in the shape of the eurozone's bailout fund, known as the European Stability Mechanism (ESM), which will serve as the financial backstop to the EU's authority for handling failing banks.
Ministers also managed to update the credit lines that the ESM can offer to countries in economic difficulty — but only under strict conditions. The agreement makes reference to plans to develop a eurozone budget, a concession to French Finance Minister Bruno Le Maire, who clashed with the Netherlands over the need for a "stabilization function" in the final text. The limp compromise: "Technical discussions continue."
Berlin has always envisioned a strict rules-based structure with more sticks than carrots than many of its allies.
While the post-meeting pronouncements were predictably boastful — "we made it," Eurogroup President Mário Centeno said — once again the ministers failed to agree to implement the two instruments many economists argue are essential to steel the eurozone against future crises — a eurozone budget worthy of the name and bloc-wide deposit insurance.
"It's not the great leap forward," said Carsten Brzeski, ING's chief economist in Germany. "It's a Reförmchen" — a mini reform.
Not that any close observer of the process expected anything different.
Just over a year ago, French President Emmanuel Macron ignited the hopes of Europe's dreamers by sketching out a vision for a more tightly entwined eurozone with its own budget and finance minister. Now was the moment, the integration enthusiasts argued, for a newly reelected Angela Merkel to lock arms with the youthful French leader and deliver the currency bloc from its chronic torpor.
It wasn't meant to be. Instead, Merkel became bogged down in interminable coalition talks. By the time a government was formed, the momentum was long gone, and Merkel had her hands full on other fronts.
Of course, one can make a strong case that the German leader was never going to embrace Macron's ideas. Her responses to his plan, though vague, were lukewarm from the beginning. Whether that's because the chancellor believes she has little chance to push ideas like a big eurozone budget through the Bundestag, the German parliament, or because she didn't think much of them is unlikely to be known until she pens her memoirs.
Whatever the case, Macron's diminishing political fortunes at home didn't help matters much. By the time the two met in June to hash out a blueprint for a eurozone reform at Meseberg, a country manor near Berlin, the undertaking was mostly a face-saving exercise.
Behind the scenes, Berlin was quietly encouraging other northerners, including the Dutch and the Finns, to voice their own resistance, according to diplomats close the talks. While Germany couldn't be seen openly undermining the process, it was more than happy for the so-called Hansa group to do so.
All of which, given the eurozone's recent history, raises a very basic question: Why?
The main answer is that while Germany always paid lip service to the necessity of deeper eurozone integration, Berlin has always envisioned a strict rules-based structure with more sticks than carrots than many of its allies. Indeed, in a country where many people are convinced Germany saved the eurozone (and not that it contributed to the crisis with its huge surpluses), sharing the power of its purse was never a serious option.
As populists in Italy thumb their noses at the EU's fiscal rules, they have only reinforced even more the sterner side of the Germans on these things.
In addition, as the effects of the crisis have waned, the necessity for dramatic action appears, at least in the eyes of many German politicians, to have vanished.
In much of Europe, worries about migration have supplanted concerns over the euro's future in most voters' minds.
The stasis of recent years has convinced some observers that meaningful eurozone reform is only possible with much deeper political integration in the EU. Yet that is also unlikely, barring major political or economic upheaval.
If the history of the euro has taught Europe anything, it's that real reform is only possible when the bloc is staring into the abyss. Before the crisis that began in Greece, for example, few could have imagined that the eurozone, with German support, would institutionalize a bailout mechanism akin to a European monetary fund.
"We'd need a big fat new crisis to really push things forward," ING's Brzeski said.
So the end result is a fudge dessert rather than a full blown gourmet meal?
Isn't it fundamentally a difference between people who believe in free market economics and capitalism and those who do not and want a centrally planned socialist economy ? You can only see bank bailouts and 'stability mechanism' as positive if you think that bankruptcy and reforms are bad. You do not want banks to be bailed out if they do foolish things. Same with 'stability' you want dynamism not stability. The Soviet Union was very stable everyone was equally poor.
Eurozone will never be reformed, because eurozone is unreformable. European North cannot have the same currency as European South. As simple as that. They need completely different and opposite policies. North is low debt, high productivity economy, South is high debt, low-er productivity economy. High debt countries need low interest rates so that they can service their huge debt, low debt countries need high interest rates to keep their economy from overheating, via various bubbles. But ECB has only one rate, it cannot have both high and low interest rate. So which one will they pick. Either ECB accommodate North and kills Southern economy or it accommodates South and kills North. Whatever they do, they kill half of Europe, either north or south. That´s the basic, fundamental contradiction of eurozone and not even a common budget helps, because it would not change the basic structure of economies.
Now, I see our enlightened leaders are dreaming of big crisis, so that they can ram their totalitarian dreams down the throat of unwilling commoners. This itself speaks volumes. Just think about it. Leaders all around the world are hoping to avert crsis, ours are thinking, dreaming, hoping for a big crisis. I´ve been saying this for years, the biggest enemy of Europe and Europeans is Brussels, and its apparatchiks. Anyway, not only are our leaders suicidal, they are also completely clueless. The next big crisis will not bring the big reforms, as they hope, it will bring the end of their unworkable utopia, the frankenstein euromonster currency DIS-union.
This world, our planet, galaxy and entire Universe is based on balance, in the end, anything irrational, unworkable and unbalanced will come to the end. Good riddance.
If the German, or Dutch banking system went upside-down tomorrow, do you think the German or Dutch government would just allow all the banks to go bankrupt, or would there be bailouts? Of course there would be bailouts.
If things don't change, in a major crisis problems would be handled again as they were in the previous one – ad hoc. The eurozone needs clear rules, and new institutions (such as common deposit insurance) in order to avoid that in a future crisis – to avoid turning a Greek sovereign debt crisis or an Irish bank debt crisis into a eurozone in crisis in which everyone wonders whether this will bring the entire system down.
Yes, in the future it should be possible for a big bank or a eurozone country to go bankrupt without this potentially destroying the entire financial system and the entire economy. That won't be achieved by foot-dragging on reforms and keeping things more or less as they are, however.
That is exactly what would happen but that doesn't make it right or helpful. Banks that recklessly lend and are irresponsible should go bankrupt. The banks who do not and did not do foolish things should then increase their market share. Why reward bad behavior and punish good behavior ?
Southern Europe should simply get their act together and work harder , spend less save more etc. live within their means. Economies that are high debt and low productivity should crash , why would you want to encourage that ? And punish having low debt and high productivity ? A currency is just a means of exchange and a store of value this whole notion it cannot 'work' is ridiculous. Interest rates should be set by the markets not by a central bank artificially manipulating rates and causing bubbles.
Who is going to Guarantee it ?
Equal contribution from all Member?
It doesn't work, it never worked and believing in the Euro has been the biggest act of deliberate self-delusion ever willingly entered in to by the European continent.