We now have the solemn statement by the heads of state and government of the euro area. It says that as part of a package involving substantial International Monetary Fund financing and a majority of European financing, Euro area member states, are ready to contribute to coordinated bilateral loans. Any disbursement on the bilateral loans would be decided by the euro area member states by unanimity subject to strong conditionality and based on an assessment by the European Commission and the European Central Bank.
Now the real question – is this really a bail-out for Greece? Not easy to say. Alan Beattie says that the IMF will be in real difficulty with Greece, since the only real instrument available is fiscal policy (since the ECB handles the monetary policy for Greece). We already know that Greece is experiencing extreme difficulties with its own population over fiscal austerity measures. So how far can the Greek government go to convince the IMF that it’s on a sustainable path?
On another level, some commentators are wondering about the new positioning of Germany in the EU. This is a very important topic indeed. George Irvin talks about “Merkel’s madness” in refusing to face the consequences of financial contagion. Philip Stephens asks the fundamental question – what sort of Germany is developing in these tumultuous times?
The internal solidarity of the European Union is not a boundless concept. From a purely legal perspective Mrs. Merkel is very much on the right track, provided that Germany was strictly pursuing the objectives of the Stability and Growth Pact. However, Germany itself breached the pact and knowingly let other countries to breach it. This important fact should be reminded to the German government.
I would definitely not want to see a further drift away from the political cohesion of this Union.