Guardian
July 14, 2011
There's a scene in the film Shakespeare in Love where Queen Bess has to cross a muddy puddle. In a spoof of the Sir Walter Raleigh legend, she waits for a courtier to whip off his cloak. It takes an age for the young men to realise what they are supposed to do, so with a angry mutter of "too late, too late", the Queen gets her feet muddy.
"Too late, too late" may well prove to be the epitaph on the tombstone of Europe's single currency if the almighty crisis now brewing ends in catastrophe. That is entirely plausible, because while attention in Britain has been focused for the past week on Rupert Murdoch's phone hacking scandal, for monetary union the crisis has deepened.
It has been a familiar pattern. Financial markets have turned on one of the weaker members of the single currency, pushing up the cost of financing its debts. The difference is that the country in the firing line this time has been Italy, which accounts for 20% of the eurozone's output, as opposed to Greece's 3%. Italy went into monetary union with high levels of national debt and has struggled to live with the disciplines of the club. Over the past decade it has lost competitiveness to Germany and can no longer respond by devaluing the lira, which it did regularly when it had its own currency. As a result, Italy is the latest country to prepare a package of austerity measures in the hope that it can cut its way out of trouble.
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