Germany

‘I think we are at a make or break place in Europe,’ said former Greek Prime Minister George Papandreou on the Andrew Marr Show. Europe is holding its breath for the results of today’s election, which, should the radical leftists Syriza win, threatens to open a new chapter in the euro’s unhappy history. Germany remains adamant that Greek cannot renege on its bailout deal. But rumours that Germany would welcome Greece’s exit persist; indeed, the Sunday Times reports (£) that the European Union is, collectively, preparing emergency aid packages for Athens, should the country withdraw. These preparations are the sort of coherent and complete action that the euro-crisis has demanded.

‘No’ used to be the French prerogative in matters of European integration. Charles de Gaulle made a late career out of it. But perhaps the title is passing to Britain. David Cameron indicated yesterday that he would veto any EU banking treaty that did not safeguard the City, as James said he would. Meanwhile, George Osborne joined Cameron in recognising that a European banking union, under design by ECB president Mario Draghi, is necessary if the euro is to survive. Angela Merkel agreed, saying that the answer to the present crisis was more Europe everywhere, only at a pace that suits weary German taxpayers. This sedate approach is becoming unsustainable.

There is an intriguing intervention from Lord Owen in this morning’s Times (£)  — and he has also written a book on the subject, Europe Restructured?. He writes: ‘The [likely response to the] eurozone crisis [greater integration] now presents us with a clear choice: do we want to be part of a country called Europe? Or should the UK be a self-governing nation in a new, looser European Community?’ (He goes on to pose two rather different questions for the referendum itself — Do you want the UK to be part of the single market in a wider European Community? Yes/No Do you want the UK to remain in the European Union, keeping open the option of joining the more integrated eurozone? Yes/No.) When might this referendum take place?

As James observed yesterday evening, the Westminster media has its eyes on one story today: Jeremy Hunt’s career-defining appearance at the Leveson inquiry. A deafening cacophony has broken out from a host of tweeters, talking heads and irate scribblers. It will be a diverting piece of political theatre at the very least. There is drama of a different kind in the Eurozone. Irish voters will go to the polls today to approve an EU budgetary restraint treaty, which they are expected to approve. Meanwhile, Spain’s borrowing costs have reached ‘perilous levels’ (6.65 per cent) according to the Times’ commentary (£).

Nick Clegg did not show his Berlin speech on the Euro crisis to Number 10 or the Foreign Office before releasing it to the media. This is quite remarkable. Up to now, there has been a recognition that while the Liberal Democrats may try and differentiate themselves from the Prime Minister on various things, the government must speak with one voice on the deficit reduction strategy and foreign policy. No credible country can afford to send mixed messages to either the bond markets or foreign governments. Clegg’s freelancing on this issue is a reminder of how Europe remains the biggest ideological fault-line in the coalition. When David Cameron formed the government, he hoped that the whole Europe issue could be parked until he had a majority of his own.

The Eurozone is a kind of lunacy if you look at it as an economic project. But this isn’t about economics, or rationality — it's about emotion, as the leader in today’s Telegraph says. The Brits and Americans often fail to understand this fully because we judge a currency union in terms of its economic merits. But many European nations see it as part of another, wider, agenda. For the Spanish and Portuguese it’s about not going back to dictatorship. For Greece it’s about being Western rather than Eastern (and not being run by the military).

David Cameron’s speech today is a sign of his frustration with the eurozone. Numbers 10 and 11 are increasingly irritated by how eurozone leaders are refusing to accept the logic of their project. What Downing Street is keen to avoid is another wasted year as Angela Merkel gears up for her reelection campaign. So, intriguingly, we see Britain throwing her weight behind Hollande’s support for project bonds. Cameron also uses the speech to again back eurobonds, which Merkel is firmly opposed to as she knows that this would mean Germany effectively standing behind everyone else’s debt. I can’t see a resolution to this crisis coming anytime soon, though. The economics and the politics are, yet again, set against each other.

Now that negotiations have broken down in Athens, and there will be another election, we face the prospect of an almighty staring contest. On one side, the Eurocracy, who will be urging Greek political parties — and particularly the left-wing coalition Syriza, which is ahead in the polls at the moment — to soften their anti-austerity stance. On the other, the Greek politicians, who might be hoping that the eurozone relents to some extent, and allows the cuts to be decelerated. The question is: who will blink first? As it stands, it’s difficult to come up with an answer.

As of today, we now have four years’ worth of GDP figures since the UK first went into recession — and they don’t look pretty. By this point in the 1930s, we’d already fully recovered from the Great Depression.

David Cameron’s complaints at last night’s EU meeting about the lack of a growth agenda have, in part, been addressed by the new draft conclusions. Cameron — who was supported by the Dutch, Italians and Spanish — seems to have secured promises on the completion of the single market, deregulation and the services directive in the summit’s draft conclusions. This isn't going to turn around the European economy. But it is a step in the right direction and a small, but possibly significant, victory for the PM.   I understand from sources in Brussels that there has been frustration with the extent to which the conclusions presented last night simply echoed the views of the Germans and the French.

Seems that the latest plan to fix the eurozone involves cooking up a pot of alphabet soup. Over in Mexico, G20 finance ministers are currently discussing whether to blend two existing eurozone bailout funds, the EFSF and the ESM, with some extra money from the IMF. They hope that this EFSF-ESM-IMF mix will add up to about £1.25 trillion of ready cash for failing eurozone economies. ‘Look at the size of our fund,’ they will then say, as they try to settle nerves across Europe and beyond. Details are lacking, but some things are already worth noting about this potential mega fund. First is that it seems to be coming about with permission from Germany.