Financial Times
December 2, 2011
Everyone is on tenterhooks in the countdown to next week’s critical European summit. The outline of the grand solution being pursued is becoming clearer as a growing number of officials take to the air waves. What is emerging seems to be a pretty good approach, provided – and this is vital – Europe agrees on the details while avoiding some highly pernicious traps.
To be clear, it is now the region’s moment of truth. To avoid a very costly and disorderly fragmentation, Europe may well be embarking on the road to embracing a smaller, stronger and less imperfect monetary union in the future. And it is down to just four carrying the heavy burden of responsibility of offering a credible hope for stabilising Europe’s crisis, namely German chancellor Angela Merkel, French president Nicolas Sarkozy, Mario Draghi, president of the European Central Bank, and Mario Monti, Italy’s prime minister.
Over the next few days, these leaders need to unite on ways to enhance the institutional underpinnings of the union, to reduce the risks imposed by the banking sector, to delineate clearly between solvency and liquidity cases, and to stop the latter from tipping into insolvency.
Should they fail, the probability of a disorderly collapse of the eurozone would increase materially. Accordingly, six key risks must be managed proactively.
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