Since Greece’s insolvent-grade financials first came to light, Europe has consistently and reliably emanated ripples of distress across the Atlantic. Recall the mini-panic of 2011, with its big selloffs in global markets. And periodic fears about the endearingly named PIIGS—Portugal, Italy, Ireland, Greece and Spain—sneezing their malaise onto France and beyond. Then there’s the latest bank-run-that-wasn’t out of Cyprus.
If very high interest rates are bad for Europe, then very low ones must be good, right? Seems logical. Yet the big drop in yields on government bonds of Italy, Spain, Ireland, and Portugal isn’t entirely positive, especially for the European Central Bank.
One way or another, the situation is Cyprus likely marks a major turning point in the eurozone crisis. It could be the beginning of true disaster for the zone, eventually leading to a series of sovereign debt defaults and possible exits from the euro area. It could also be the point at which we learn that the eurozone has done enough to shore itself up and regain market confidence, so that a disaster in Cyprus does not spread, now or later, to other vulnerable countries.
Ten years ago, Germany was considered the sick man of Europe. Its economy was mired in recession, while the rest of Europe was recovering; its unemployment rate was higher than the eurozone average; it was violating the European budget rules by running excessive deficits; and its financial system was in crisis. A decade later, Germany is considered a role model for everyone else. But should it be?
An unintended consequence of the current economic and political crises in Europe has been the completion of the continent’s decolonisation, commenced in the middle of the 20th century. As the gross domestic products of developing countries continue to grow, while many crisis-stricken EU economies are contracting, some of the formerly colonised nations, alongside China, are actively purchasing the assets that are being privatised in Europe.
The euro crisis has revolutionised politics across Europe. Established political
parties are fighting for their lives; countries that thought of themselves as part
of the European core are finding themselves on the periphery; and a huge
gulf has emerged in the core of Europe. What we are witnessing, as the euro
crisis enters its third year, is the emergence of a new political geography for
the European Union that is reshuffling the divisions within and between the
nations of Europe. The crisis is not over, but it has evolved from a banking
crisis and then an economic crisis into an acute political crisis.
As David Cameron entered the Commons at the end of a morning that began with his speech on Europe, his backbenchers did something they rarely do these days. They cheered him to the echo. Moments earlier the Conservative chairman, Grant Shapps, had announced on TV that the Europe speech had united the party. The sight of so many delighted Tory MPs, many of whom have become minor political celebrities by making the prime minister’s life miserable, seemed to suggest Shapps was right.
Looked at more carefully, however, it was a sight that brought to mind the famous words of Sir Robert Walpole, declaring war on Spain in 1739: “They now ring the bells, but they will soon wring their hands.” Or a scene that recalled something Tony Blair was fond of saying in the more recent past: “The British people may have their prejudices, but they get very uneasy when their politicians start to share them.”