English German Leo

As safe as having a suicide bomber in the sitting room

This has nothing to do with Lawrence Gonzi’s recent act of political hara kiri which he committed during the vote on the second reading of the divorce Bill, which other unrelated columnists equally dismissed as an act of political suicide, whereby as party leader he took his

party with him

It is solely concerned with the Euro crisis and the inherent risk of contagion that continues to prevail in spite of our Finance Minister’s reassurances that the situation is controllable, since he argued that the debts of Greece, Portugal and Ireland merely amounted to only around 6% of the eurozone debt.

When I recently visited Germany two things struck me most.

That while in the case of our Parliament it had to be the Opposition to trigger a long overdue debate in the House – with any vote being taken – in the case of the German Bundestag the euro crisis is not only invariably always centre stage but according to what I was told, 70% of the time of the European Affairs Committee of their Parliament is taken up with internal discussions about the issue. On the local front, our Foreign and European Affairs Committee never ever had the euro crisis on its agenda!

On the other hand I was equally alarmed by the fact that while everyone seems to be focusing on the above-mentioned three countries, at the back of the Germans’ mind there lingers a far bigger country – Spain.

Being the world’s 12th largest economy, as someone recently remarked, the ECB cannot just write a cheque and buy it!”.

A Spanish default would inevitably destroy the credibility of the euro. I am in no way implying that the euro would simply vanish into thin air, but apart from destroying its credibility such a default would or could possibly also undermine the currency in its present form.

At the time of writing Ireland has just seen its debt downgraded to junk status, which in practical terms means that its bonds have now made it to the non-investment grade.

While I was in Germany last week, Portugal went through the same experience, leading some to even resort to conspiracy theories that the credit rating agencies were part of a non-European plot to undermine the Euro. Forgetting for a moment that Fitch is not American-owned, but French!

At this moment of crisis we need to recall certain issues and clarify certain matters.

The euro was built on the assumption that no country in it would ever default.

Teo, Leo & Manda (5 languages: English, German, French ...

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