Suffice to say, it has been a testing few months for the eurozone. 'What was only last Christmas a financial bushfire in Greek financial markets,' writes the Guardian, 'has grown and spread, and is now licking at the borders of Spain and Portugal.'
When the Greek government doubled estimations of its deficit in October, the cost of servicing its debt - the 'risk' premium - rocketed. Since then, concerns that Greece and other indebted countries will default on their debts, coupled with the previous ambivalence of EU leaders over whether and how to intervene, have caused the euro's value to plummet on world markets.
Tensions appeared to reach a head last week, with reports that French President Nicolas Sarkozy threatened to pull out of the single currency to force an erstwhile reticent Germany into agreeing a €750bn rescue package for struggling member states. In addition to this unprecedented step, the European Central Bank (ECB) has also announced that it will, for the first time, buy up eurozone countries' debt.
Yet despite an initially positive response, even gestures of this scale do not seem to have reassured traders that the situation is in hand; on Monday, the euro reached a four-year low, moving closer to parity with the dollar. Only two years ago, the euro was touted as the 'saviour of troubled economies', as the most recent intake of EU states looked to join the single currency as a means of protecting themselves against the worst of the global downturn. Now, not only has eurozone membership proved to be no panacea, controversy over the accounting practices by which Greece met accession criteria could considerably decelerate the pace of future admissions. German chancellor Angele Merkel's warning that the bailout can only 'buy time' reflects widespread acknowledgement that the euro's problems will not be solved lightly.
Some economists believe that the real problem lies in the fact that while the ECB has control over monetary policy, fiscal policy - tax and spending decisions - is in the hands of national governments, who can act irresponsibly. This argument forms the basis of the European Commission's recent proposals that EU members should review their peers' spending plans in order to pre-empt future crises. Financial services commissioner Michel Barnier has also called for greater regulation of credit rating agencies, whose downgrading of Greece's debt status to 'junk' served to worsen the country's, and so the euro's predicament.
ECB president Jean-Claude Trichet recently called for a 'quantum leap' in eurozone governance. When they meet again in Brussels this week, EU finance ministers must decide whether they are willing to take one.
When the Greek government doubled estimations of its deficit in October, the cost of servicing its debt - the 'risk' premium - rocketed. Since then, concerns that Greece and other indebted countries will default on their debts, coupled with the previous ambivalence of EU leaders over whether and how to intervene, have caused the euro's value to plummet on world markets.
Tensions appeared to reach a head last week, with reports that French President Nicolas Sarkozy threatened to pull out of the single currency to force an erstwhile reticent Germany into agreeing a €750bn rescue package for struggling member states. In addition to this unprecedented step, the European Central Bank (ECB) has also announced that it will, for the first time, buy up eurozone countries' debt.
Yet despite an initially positive response, even gestures of this scale do not seem to have reassured traders that the situation is in hand; on Monday, the euro reached a four-year low, moving closer to parity with the dollar. Only two years ago, the euro was touted as the 'saviour of troubled economies', as the most recent intake of EU states looked to join the single currency as a means of protecting themselves against the worst of the global downturn. Now, not only has eurozone membership proved to be no panacea, controversy over the accounting practices by which Greece met accession criteria could considerably decelerate the pace of future admissions. German chancellor Angele Merkel's warning that the bailout can only 'buy time' reflects widespread acknowledgement that the euro's problems will not be solved lightly.
Some economists believe that the real problem lies in the fact that while the ECB has control over monetary policy, fiscal policy - tax and spending decisions - is in the hands of national governments, who can act irresponsibly. This argument forms the basis of the European Commission's recent proposals that EU members should review their peers' spending plans in order to pre-empt future crises. Financial services commissioner Michel Barnier has also called for greater regulation of credit rating agencies, whose downgrading of Greece's debt status to 'junk' served to worsen the country's, and so the euro's predicament.
ECB president Jean-Claude Trichet recently called for a 'quantum leap' in eurozone governance. When they meet again in Brussels this week, EU finance ministers must decide whether they are willing to take one.
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