What Euro Crisis?

European leaders, led by French President Nicolas Sarkozy, declared in May a systemic crisis of the euro, thereby invoking a clause of the EU Treaty intended to help member countries facing the effects of natural disaster. But there is no crisis of the euro, only a search by markets for a new equilibrium on interest-rate spreads – which are still far below pre-euro levels.

MUNICH – Despite huge rescue packages, interest-rate spreads in Europe refuse to budge. Markets have not yet found their equilibrium, and the governments on Europe’s southwestern rim are nervously watching how events unfold. What is going on?

The rescue packages were put together on the weekend of May 8-9 in Brussels. In addition to the €80 billion program already agreed for Greece, the European Union countries agreed on a €500 billion credit line for other distressed countries. The International Monetary Fund added a further €280 billion.

The driving force behind all this was French President Nicolas Sarkozy, who colluded with the heads of Europe’s southern countries. French banks, which were overly exposed to southern European government bonds, were key beneficiaries of the rescue packages.  

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

or

Register for FREE to access two premium articles per month.

Register

Support High-Quality Commentary

For more than 25 years, Project Syndicate has been guided by a simple credo: All people deserve access to a broad range of views by the world's foremost leaders and thinkers on the issues, events, and forces shaping their lives. At a time of unprecedented uncertainty, that mission is more important than ever – and we remain committed to fulfilling it.

But there is no doubt that we, like so many other media organizations nowadays, are under growing strain. If you are in a position to support us, please subscribe now.

As a subscriber, you will enjoy unlimited access to our On Point suite of long reads, book reviews, and insider interviews; Big Picture topical collections; Say More contributor interviews; Opinion Has It podcast features; The Year Ahead magazine, the full PS archive, and much more. You will also directly support our mission of delivering the highest-quality commentary on the world's most pressing issues to as wide an audience as possible.

By helping us to build a truly open world of ideas, every PS subscriber makes a real difference. Thank you.

Subscribe Now

https://prosyn.org/0cgUGis