Greece

So much rot has been said about the Eurozone crisis that you do wonder whether Merkel, Sarkozy et al have come to believe their own spiel. This is an economic problem and it can’t be solved by political will. Greece is bust and several French, German and Dutch banks were stupid enough to lend €130 billion to the Greek government that they're not going to get back. All the summits in the world cannot change this simple fact. These crisis talks are about bailouts for banks, not bail outs for Greeks. BNP Paribas is in for €37bn. Commerzbank of Germany is owed €15bn. And if Greece defaults, then insurance claims are triggered.

Slovakia is a small country that most people might confuse for Slovenia at a Pub Quiz. It has been a member of the eurozone for less than three years and represents less than 0.5 per cent of Europe's GDP. But it is now also one of the greatest problems for the euro, after the country's parliament voted tonight to reject an expansion of the European financial stability facility (EFSF). The vote would have allowed the EFSF to lend £385 billion, funds needed to tie Greece over. But little Slovakia said "no" to the EFSF expansion: the only country in the eurozone to do so. The Freedom and Solidarity party (SaS), a part of the governing coalition, refuses to support the bail-out fund.

It was something of a mystery. Emergency conference calls about the future of the Eurozone were being made yesterday, but there was no news of those discussions. As it turned out, this was for the best of all possible reasons: there was no news to report. Angela Merkel and Nicolas Sarkozy announced no new measures to alleviate the sovereign debt crisis; rather, they merely declared “solidarity” with Greece and assured the markets that Greece would not be forced from the single currency. Their words seem to have assuaged the markets for the moment, but only the most brazen optimist would bet on the rally being long lived.

Angela Merkel, Nicolas Sarkozy and George Papandreou are in crisis talks about Greek debt. There are rumours that they are preparing an "orderly default" for Greece. But, officially, Merkel is still pressing ahead with implementing the existing Greek debt deals. This meeting also has a domestic context for Merkel. According to the FT, she is determined to stamp on the growing disquiet within her governing coalition over the Eurozone crisis and is pleading for calm resolve. It remains to be seen if she succeeds.  The danger of contagion within the Eurozone remains and concerns about the exposure of French banks persist, which is doubly worrying for Nicolas Sarkozy given the proximity of French banks to the French state.

The Eurozone’s political crisis is deepening. Further to the news that individual member states were seeking their own bilateral deals with Greece to insure their taxpayers’ money from default, the FT reports that disagreements are emerging over how these deals should be conducted. Holland objects that Finland’s accord with Athens relies on Greece using EU bailout funds as collateral. “The Netherlands is no supporter of this proposal,” Jan Kees de Jager, the Dutch finance minister, said. “It is not compatible with the principle of equal treatment of all euro countries.

The American historian Walter Russell-Mead has a cynical — but very possibly accurate — take on what the French are trying to persuade the Germans to accept with their plan for Eurobonds: 'France’s clear short term goal is to commit Germany to underwrite debts from weak EU states.  That not only staves off a crisis that threatens to engulf France; by putting Germany on as a co-signer for Greek, Italian and Spanish loans, France will ensure that Germany’s credit rating will not be better than France’s. The French will accept almost any German rules to limit the ability of countries like Greece to run up new debts.

The end might be nigh for the euro. The currency has hit an all-time low against the Swiss franc, as individual eurozone government bond yields vaulted higher due to mounting concerns about the region's debt crisis. To spell out what this means: in Spain, 12 billion euros of interest payments will accrue for every 100 point bond rise in Germany. That is more than Spain's annual public investment in infrastructure (8.6 billion) and its entire defence budget (7.6 billion). At the same time, Greece is heading towards disorderly default or some form of devaluation. Or both. And now Italy looks vulnerable.