ANALYSIS:The unpopularity of leaders across Europe will make reforming the single currency very difficult, writes ARTHUR BEESLEY
BACK TO the front. European leaders meeting in Brussels yesterday had the benefit of relative calm on international markets as they discussed the economic crisis. But they remain under exceptional pressure to plot a course through the storm.
That there was no sense of immediate panic as Brian Cowen joined Angela Merkel, Nicolas Sarkozy et al in the vast Justus Lipsius complex lent a certain air of calm – and a frisson of anticipation over the Roma row.
Still, this merely masks a chasm over the revamp of the single-currency system and entrenched fear of a sudden outburst of renewed turmoil. The crisis is anything but finished. If the Anglo Irish Bank explosion has Ireland on the edge as Europe looks on agog, the fact is that every strain is seen as something which could bring flames down on everyone else.
The system is brittle and worn. What’s bad for Ireland is bad for Spain and Portugal and what’s bad for them is bad for us.
Cowen knows well that Ireland’s vulnerability does not end with Anglo, whose rescue has spooked the markets.
AIB remains to be fixed – with the injection of yet more State aid a possibility – and elevated bond yields are eroding the benefit of cutbacks already taken and those still to come.
For the Taoiseach and everyone in his Government, it’s a confidence game without end and with an audience that includes the public, bond market investors and powerful folk in the very top echelon of European politics.
Thus it cannot have been easy for Cowen yesterday morning as he strode into the summit alongside Minister for Foreign Affairs Micheál Martin.
Not that anyone here is talking much the dreaded Galway broadcast – many in Brussels didn’t notice the affair at all. But public apologies are not the stuff of brio on the international stage.
One way or another, most of Cowen’s senior counterparts in Europe are on the hind foot politically. Merkel’s room for manoeuvre has been circumscribed ever since she lost her majority in the upper house of parliament; Sarkozy’s popularity has collapsed; Silvio Berlusconi administration in Italy is teetering; and José Zapatero is haunted by fear that his reprieve from the markets may prove temporary. Similar weakness prevails elsewhere, with only the recently elected David Cameron seen to be secure.
All of which makes it especially difficult to agree the most crucial element of the package to reform the euro system: sanctions on countries that consistently break EU budget rules.
Fearful that large fines would only magnify countries’ fiscal weakness, Merkel and a few other leaders want instead to suspend the voting rights of errant countries. But most countries – Ireland among them – don’t want that, not least because it involves a change to the EU treaties.
The talks have been stalled on this point for months, with little sign of compromise. While some well-placed observers see domestic political concerns in the roots of Merkel’s intransigence, the final push for a deal cannot be avoided forever.
And frustration is taking hold. Luxembourg prime minister Jean-Claude Juncker, who chairs meetings of the euro finance ministers, yesterday bemoaned the “nonstop repetition of generalities” in the talks and “the impression on financial markets that we’re not following through” with important reforms.
Yet if a sense of drift is palpable, so too is the perception that things would move quickly if there was another bout of disruption. Testing times for European Council president Herman Van Rompuy, the man charged with bringing everyone together in six weeks’ time. Testing times for everyone.