Arab Today, arab today tighter eu emerging as eurozone seeks lasting solution
Last Updated : GMT 08:44:49
Arab Today, arab today
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Tighter EU emerging as eurozone seeks lasting solution

Arab Today, arab today

Arab Today, arab today Tighter EU emerging as eurozone seeks lasting solution

Paris - AFP

All attempts to end the eurozone debt crisis so far have failed, analysts say, forcing leaders into a new and uncertain dimension of deeper integration that holds both promise and dangers. From the Greek government\'s shock discovery of hidden deficits in 2009 to a hasty 100-billion-euro ($125-billion) rescue of Spanish banks three years later, the history of the eurozone debt crisis has been a \"patchwork of sticking plasters\". Eleventh hour bailouts of Greece, Portugal, Ireland and now Spanish banks, all born of panic on the financial markets, in each instance only bought time, before uncertainty quickly returned. The rescue of Spain\'s banks, which was supposed to ease borrowing costs to levels Madrid can afford, almost immediately fell flat and, analysts say, may prove to be the last straw for business as usual in the eurozone. The bailout \"is just going to delay the inevitable\", said Ben Taylor, a sales trader at CMC Markets, as adding the cost of rescue loans to Spain\'s banks onto the country\'s debt will only precipitate a full Spanish bailout. That may push Europe across the Rubicon. A \"patchwork of sticking plasters can only buy a little more time before Europe\'s policymakers are forced into some form of closer fiscal and political union in order to save the euro\", said Capital Economics analyst Julian Jessop. And strikingly, amid the debt crisis storm, it is indeed more integration that is being openly called for by the European leaders who matter the most in the lead up to a key June 28-29 EU summit. But the approaches vary deeply making the road ahead precarious. Lamenting a \"lack of confidence\" in responses to the crisis, German Chancellor Angela Merkel has advocated that Europeans \"work on the causes and not on the symptoms\" of the crisis. Merkel said deeper union is key, but pushes \"political union first and foremost\", pegging it to her cherished fiscal pact, that holds EU nations to tough budget commitments through the threat of penalties. \"That means we must, step by step, cede responsibilities to Europe,\" Merkel told ARD public television earlier this month. But \"step-by-step\" takes time, and time is what leaders in countries under the financial gun such as Spain and Italy, and maybe even France, do not have the luxury of affording. At Forex.com in London research director Kathleen Brooks said, \"As we have seen in the past, the problem with the sovereign debt crisis is that it is systemic and as such France, Italy, etc are all at risk of contagion. Thus, the Spanish bailout may be no panacea to this crisis.\" That is why calls for integration from France and Spain have held a different tenor, with the word \"political\" notably absent, replaced by calls for investment and a bigger role for the European Central Bank. \"We are already in another stage,\" of the eurozone crisis, France\'s President Francois Hollande has acknowledged, hanging his proposal for a more federal Europe on swift moves to joint eurozone debt, banking union and more spending. And Spain, whose conservative government has pushed through German-inspired austerity without yet reaping any rewards, just wants a quick end to its financial nightmare that has pushed millions into joblessness and poverty. To Spanish Prime Minister Rajoy, only the ECB has the necessary firepower. However any measures that would amount to the central bank underwriting national finances is anathema to Berlin and, more often than not, to the ECB itself. But despite German reluctance, Unicredit economist Erik F. Nielsen said the June summit will \"likely set in motion an integration process that will lead to a eurozone banking union and ultimately partial sharing of sovereign debt\". The risk, he added, was that the \"inevitable\" process would lead to an internally consistent union for the EU and eurozone members ready to be on board but would pose \"new challenges\" for those remaining outside. In the Financial Times, commentator Philip Stephens said Britain could be the biggest victim of more union on the continent that could turn the UK into a \"Greater Guernsey\", an oversized offshore haven for big banking. For Jessop, the real question is whether the leaders advance integration soon enough \"to prevent some of the weaker members from leaving\" the European project put on the rails over half a century ago. The economist said he doubted integration will happen soon enough for the likes of Greece and Spain, but that a union of the core countries will eventually emerge further down the road. Speaking to the European parliament this week, European Commission chief Jose Manuel Barroso made clear that to him the solution to the debt crisis lay in urgent progress towards ever greater integration. \"Without confidence (on markets) in the irreversibility of economic and monetary union, our prospects are limited,\" he said. \"We are now in a defining moment for European integration,\" he said, summing up one of the more unexpected turns in the eurozone debt crisis.

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