BAILOUT FUND:The tight timetable of an emergency meeting was made tighter as Germany's Wolfgang Schäuble was rushed to hospital, writes Arthur Beesley
EU FINANCE ministers gathered in Brussels yesterday for emergency talks on the creation of bailout fund for the euro zone.
After euro leaders resolved in the same building late on Friday night to advance drastic measures to shore up the beleaguered single currency, the ministers’ meeting took place as the clock ticked relentlessly towards the reopening of world markets after the weekend.
Momentous decisions which could determine Europe’s economic prospects for long years to come were being hammered out at breakneck speed over 48 hours.
The meeting took place in a vast fifth-floor conference room, ministers sitting side by side around a circular inner table while diplomats and advisers sat behind them at a larger outer table. While most EU meetings are multilingual affairs, English is the lingua franca when finance ministers meet. They’ve seen rather a lot of each other lately as long-held fiscal dogma falls by the way and the financial rulebook is rewritten every other week.
The timetable was already tight – some would say impossible – but events yesterday afternoon quickly took a dramatic turn when it emerged that German finance minister Wolfgang Schäuble was rushed to hospital in Brussels due to an adverse reaction to new medication. Schäuble, who is prone to ill health, has used a wheelchair since an assassination attempt almost 20 years ago.
A key figure in increasingly frantic efforts to keep a lid on the debt crisis, he knows more than most the depth of Chancellor Angela Merkel’s resistance to bailouts which cast her country in the reluctant role of Europe’s paymaster. Other EU ministers continued their talks in Schäuble’s absence, but they could not take the most important decisions until interior minister Thomas de Maizière arrived in from Berlin to lead the German delegation.
That such a crucial intervention – arguably the most crucial – in a hugely important meeting would be left to a newcomer was less than ideal. Every step of the way, Berlin has argued for caution and a minimalist response to crisis. It was the same in the build-up to the momentous decision to pursue another path last Friday night. The summit was called at the behest of Merkel, who didn’t want to send a signal that something as important as a €110 billion loan plan could be settled by mere ministers, as it was the previous Sunday in the Lipsius building. But the very scheduling an informal leaders’ dinner – turbot on the menu, asparagus too – created a renewed wave of expectation in markets.
This was rigidly in keeping with the sense of disarray that has hung over every desperate attempt by the European authorities to nail the sovereign debt crisis. Scarcely anything has gone to plan in the months since Greece admitted concealing the dire state of its public finances with bogus statistics, the inadequacy of every new measure to avert doom evident in the pressure that has piled on Europe’s leaders.
Some saw the €110 billion EU/IMF rescue plan for Athens as the final move. If only.
Markets responded with with scepticism on Monday, doubting eyes fixed on the feeble public finances of Spain and Portugal. In public, officials in Madrid, Lisbon and Brussels denied any unease about the prospects of these two countries. In private, however, anxiety was approaching fever pitch.
Two or three months ago, European Commission chief José Manuel Barroso informally tabled a plan under which the EU executive would become a lender to distressed euro members. Berlin brushed him off, say sources. As markets went into a frenzy last week – pressure that many in Brussels expected – Barroso reopened the file.
The first public indication of a shift came on Wednesday morning when economics commissioner Olli Rehn, one of Barroso’s closest allies, told reporters of his concern to prevent a “bush fire becoming a forest fire”. For weeks, the commission dismissed as a matter of routine any suggestion that help would be needed for Spain or Portugal. The subtle change in its public stance was rooted the belief that fresh action was required to avert potential catastrophe. “You cannot afford to let the markets think that they can bring down Spain,” said an informed source.
But even as leaders travelled on Friday for their fateful encounter in Brussels, some participants were angling for a soft-pedal approach. European Council president Herman Van Rompuy circulated a draft statement which was long on aspiration but short on actual measures. This drew a withering response from Barroso and from Nicolas Sarkozy, who argued that the time for talk had passed. Soon, three separate texts were in circulation. Dinner was delayed.
Sarkozy and Barroso were supported by Jean-Claude Trichet, head of the European Central Bank, who travelled to Brussels from Lisbon after the bank’s governing council took stock of grim news from the markets. For the ECB, guardian of price stability in the euro zone, the issues were now “systemic”.
Sources said Sarkozy practically burst into gear when the meeting finally started. Sources said all leaders were particularly engaged in the exchanges that followed.
As always, Merkel was the last to move. Even though the weekend push for broke bore all the hallmarks of a political system finally galvanising itself after months prevarication, some participants put Merkel’s change of heart down to a phone call from Barack Obama.
As Greece’s meltdown went global, Berlin finally turned. Whether the solution fixes the problem remains to be seen.