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The Euro-Crisis: Apocalypse Soon?

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The endless eurozone crisis provokes a despairing weariness. It suffocates almost every international meeting like a damp, grey blanket. The G8 has come and gone in Camp David, bringing, so it seems, a solution no nearer. Yet another EU summit will gather later this week. No-one is holding their breath that something fresh and decisive will emerge to halt the ever-mestasising threat of sovereign default. People are getting worn down on both sides of the Atlantic by the euro's constant menace to the best laid plans for the revival of national economies. The growth v. austerity battle is a false and tiresome dichotomy.

Yet, something has recently changed. To weariness, now add raw alarm. Over the years, European politicians have repeatedly cried wolf, invoking deadlines for a final solution to the euro-crisis that they have then declined to honour. The eurozone has staggered on, inhabiting a no-man's land somewhere between imperfect remedies and terminal crisis. Merkel's Stability Pact is the perfect embodiment of this state of limbo - too little, too late. Now, the new deadline is the Greek general election on 17 June. David Cameron has even labelled it a referendum on membership of the eurozone.

But, this time the wolf may soon be at the door. It takes the ominous shape of a run on banks, precipitated by a victory in the Greek election of the anti-austerity parties.

This is where the raw alarm comes in. We are already witnessing what looks like the start of a run on Greek and, possibly, Spanish banks. If this were to turn into full-scale panic - and it could happen even before the Greek elections - the euro-crisis would move into a new, uncontrollable and infinitely more dangerous phase. We are talking about the possible breakdown of societies and polities.

A Luxembourg politician notoriously said about the euro-crisis: "We all know what to do, but we don't know how to get re-elected once we have done it." This is the heart of the matter. Throughout the eurozone, and above all in Germany, politics has got in the way of a solution. You can understand why the German electorate is reluctant to throw what it sees as good Germany money after bad. Merkel is up for re-election next year and has just received a bloody nose in the important Nordrhein-Westfalen regional elections. But, it cannot be too often emphasised that it was above all at German insistence that, for political reasons, Greece and the peripherals joined the eurozone, even though none was economically fit to do so. The Greek chicken is the first to come home to roost, and how; and, while blame can be justifiably heaped on a succession of lamentable governments in Athens, Germany cannot dodge its own heavy responsibility for the euro-shambles that has ensued.

By all accounts Germany was isolated at the Camp David G8 meeting, as the other states put pressure on Merkel to place more of her country's resources in defence of the eurozone - to accept that only something like a eurobond can create a firewall large enough between Greece and the rest of the eurozone, not to mention the UK and the US (I assume that Greece herself is a lost cause). This was a novel experience for Germany. Has there ever been an occasion since the creation of the Federal Republic, when the Germans have been isolated at an international conference?

The 64,000 euro (or is it drachma?) question is whether this new and perilous phase in the euro-crisis will finally persuade Berlin to agree to the full 'mutualisation' of sovereign debt, as the precondition for a fiscal union worthy of the name. It is not necessarily a vote-loser for next year's elections. To go into battle as the saviour of Europe is surely no mean electoral asset.

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