Merkel relief at 'good day for Europe'

Angela Merkel Chancellor Angela Merkel, speaking at the Bundestag, welcomed the ruling

Chancellor Merkel stood before the ranks of the Bundestag yesterday and declared it "a good day for Europe".

The German Constitutional Court had just given the green light for the ESM - the eurozone's permanent bailout fund - to go ahead.

So it was possible to deploy yet another weapon in fighting the eurozone crisis. The ESM - with a 500bn-euro (£400bn) war chest - will handle future bailouts.

So several obstacles that might have spooked the markets have been cleared from the path. Some European officials - who last year declared the crisis over - are hopeful once again.

It helped that the Dutch electorate, at the last moment, shied away from backing parties openly critical of the centralising power of Brussels.

The days of unbending austerity are over in Europe. Officials and leaders are operating on flexi-time.

The ECB was given the nod from Berlin to agree to buy unlimited bonds of those countries in trouble.

Portugal, unable to meet its targets, has been given more time.

If Spain applies for a full bailout there are powerful voices saying no new conditions will be necessary. The promise that help comes with "strict conditionality" may not be kept.

Greece is certainly being told it must live up to its commitments, but talk of a Greek exit from the eurozone has suddenly disappeared from political circles in Berlin. Chancellor Merkel will not sanction it.

More Europe?

Suddenly there is the glimpse of a looser monetary policy, of targets relaxed and of debt being mutualised.

Ironically the key to this is national politics. There is now just over a year until elections in Germany. Chancellor Merkel does not want the eurozone crisis to dominate the campaign. That may be wishful thinking but compromise is the word of the moment.

The eurozone crisis - as widely predicted - is being used to justify deeper integration. President Barroso is calling for "a federation of nation states". Mrs Merkel is signed up for "more Europe".

The danger in this is that Europe will turn inward, obsessed by its own structures, unleashing intense debate about the Europe of the future. President Barroso hints at treaty change by 2014.

Selling more Europe will be a difficult task when the polls suggest increasing alienation from the European project.

In the meantime there is the real economy. There are over 24m people out of work. Recession, in some countries, is deepening. Debt is still climbing, growth elusive.

In some countries, like Greece, Spain and Italy consensus is fragile. There are some green shoots: exports to countries outside Europe are increasing and some competitiveness is returning.

So "A Good Day For Europe" - perhaps. But not yet for the real economy. And that is where Europe will be judged.

Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 257.

    #254 dmr

    -- Most Brits go on their pension and ´social´ simultaneously.

    --and why should Greeks have it better than Brits, Romanians, Serbs, Croatians or Bulgarians ?

    --or your children ?

  • rate this

    Comment number 256.

    #253 Durstigermann

    --of course they (most) are meaningless --but obviously not to our American contributors.

    --one thing is clear (as you say) --printing money has failed.

    Fear is justifiably increasing and there is little choice but to swallow nationalism and join the ´only game in town´. Angela is not only the ´bank´ but also the dealer --who brought the cards with her, to the table,

  • rate this

    Comment number 255.

    254 DM

    The Europhiles are not to blame for the plight of your pensioners and neither is the EU. A country whose people refuse to pay taxes and with a thriving black market will have no money for pensions. Their leaders were responsible and maybe that will result in some sort of supervision so that it can't happen again (when no doubt people like you will complain of outside interference)

  • rate this

    Comment number 254.

    I wonder if the Greek pensioners I spoke to, whose pensions have been cut to 70 Euros a month think it's the end of the crisis.
    Are all the so called Europhiles on this blog happy to see them suffer, because the Greek government wants to toe the EU line.
    History repeats itself and the innocent pay the price.

  • rate this

    Comment number 253.

    @247 quietoaktree

    All this these short-term fluctuations are meaningless. The theory that central bank intervention on a massive scale can positively influence the economy in the long run is a fallacy.
    All Bernanke is doing is a massive redistribution of wealth, esp from the middle class to the top.
    That the ECB is joining in on this thievery just showcases the utter cluelessness of the EZ.

  • rate this

    Comment number 252.

    P. s.

    @ 250

    Yes, that was my mistake, I’m not a BBC Editor. I meant risky EZ bonds and safer EA bonds. EA that’s to say Euro Area. There are no Eurobonds, as we all know. The Danish Krone has BTW a FIXED exchange rate against the €. Not sure how both the UK and Sweden will like QE3. And the DM wouldn’t have liked it either. But I’m very confident many missed my point.

  • rate this

    Comment number 251.


    off I go
    but better thread this one

  • rate this

    Comment number 250.

    @240 Denmark and Sweden are not part of the EZ (lucky Danes and Swedes!) so I'm not sure why you list them as EZ countries.

  • rate this

    Comment number 249.


    IMO There’s NO confidence related € rise. IMO it’s just QE3 and $ devaluation.

    ... Because … As you know, the Draghi - Merkel Plan is still in its early infancy, there are many nuts around, many of them located in a central bank I won’t name, and lobbyists who purport themselves as journalists. Plus, tax evasion is very hard to eradicate in many countries ( not only that one ).

  • rate this

    Comment number 248.


    Wait for Krugman’s next NYT column ( and check his blog more often ).

    QE1 & QE2 were failures ? Hard to say. IMO without QE1 we would be living by now in a much worse world, as we can’t, we all, do, all of us, “an Iceland” — i. e. default.

    Gold is rising due to QE3. And IMO € is ONLY rising due to QE3.

  • rate this

    Comment number 247.

    #243 77RA

    QE3 --is an admission QE1 and QE2 --were failures !

    i.e. -- this maybe is the last hope of anything solving anything.

    Gold is rising on the hope something can be saved --and the Euro is rising as it appears there is more trust in Merkel -than Bernanke.

    --pmk´s nightmare.

  • rate this

    Comment number 246.

    233 power

    Its failed leftovers: Cuba, Vietnam

    Failed? Oh I don't know. Considering how many attempts you made on Castro's life they are surviving. A delightful people with a sophisticated medical system.

    As is Vietnam thanks to it's resilient people who couldn't be beaten despite being nearly bombed into oblivion. They literally dug themselves in and lived like rats. But they survived!

  • rate this

    Comment number 245.

    QOT As for gold, given some amount of gold, it will become more expensive (IF its value is expressed in $), because the $ will be valued less and less, that’s devaluation. Good for USA exports. Bad for EZ exports. Currency wars. It makes it even less sensible for export driven countries to switch back to national currencies with a likely unfavorable exchange rate which will hit their exports.

  • rate this

    Comment number 244.

    225 smroet

    "This must have been a long story, all we will retain is that "you singlehandedly collapsed the Soviet Empire". Quite an achievement."

    He does admit that Ronald Reagan also had a hand in it. No doubt the Russian people will soon erect a statue to those two heroic figures

    SDI in 1983 was bluff.

    It never existed - all smoke and mirrors. Did Russia believe it?

  • rate this

    Comment number 243.

    As for the $. Given the Fed statement of intent about QE3, if I own 10$, NOW I know they will be valued less and less in the medium term, due to QE3. Therefore I exchange these 10$ as soon as I can with € ( i. e. I buy € with my 10$ ), for example, because as I said I know my 10$ will be valued less and less.

  • rate this

    Comment number 242.

    "[I'm a merciful, patient and still flexible person. And I'll pray for you.]"

    -- you cheapskate !

    -- I suppose logic is too expensive ?

  • rate this

    Comment number 241.

    #236 PMK

    You don't have to make a choice [you did already]. There was debate in the scientific community about Teller's claims, and Bethe came out in opposition to him. I can easily find quotes which say that Teller hyped his stuff about X-ray lasers, etc. I am not an expert on this at all, but Teller is known as a hardliner.

    Since you claim expertise, you are aware of this opposition, anyway.

  • rate this

    Comment number 240.


    About China … EZ has been high risk investment for the last few years … Which is why China didn’t buy risky EZ bonds … But they have kept buying “safe” EZ bonds ( Danish, German, Swedish … ).

  • rate this

    Comment number 239.

    "And I knew dr Teller personally, "

    --and Einstein once told me it´s not good to drop names ?

  • rate this

    Comment number 238.

    QOT: I hate wasting 10 minutes of my short life.

    I can wait even 20 minutes if they're really going to be your last ones.

    [I'm a merciful, patient and still flexible person. And I'll pray for you.]


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