Vox
October 24, 2011
Eurozone leaders are struggling to put together a rescue package to save the single currency. This column, which arose from discussions among many experts at the World Economic Forum’s Global Agenda Council Summit in Abu Dhabi, presents the outlines of a plan to put out the flames that threaten the euro’s existence while simultaneously setting the Eurozone on a medium-term sustainable path.
Notwithstanding the 21 July 2011 policy package announced by Eurozone heads of state and governments, the EU remains stuck in the worst fiscal crisis of its history.1 The 21 July announcement constituted the most comprehensive attempt so far to arrest the crisis. Proposals included:
- Adapting financial conditions of EU/IMF-supported programmes in Greece, Portugal, and Ireland;
- calling for private sector involvement in the Greek programme for the first time; and
- extending the powers of the European Financial Stabilisation Facility (EFSF).
It nonetheless failed. There were two reasons for this:
- It did going far enough in the main areas that it sought to address;
- it failed to offer a new perspective on reform of Eurozone economic governance which would have anchored medium-term market expectations and generated political support for exceptional short-term efforts, reassuring the public that these efforts will remain exceptional.
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