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Foreign Policy: EuroFail

Filed by KOSU News in Business.
July 2, 2012

Uri Friedman is an associate editor and Hillary Hurd is an editorial researcher at Foreign Policy.

“As a general rule, meetings make individuals perform below their capacity and skill levels,” Reid Hastie, a professor of behavioral science at the University of Chicago’s Booth School of Business, once wrote. “[P]lease, don’t just call a meeting and hope the magic happens. Take charge and take personal responsibility for meeting its objectives, whatever they are.”

It’s advice that European Union leaders would have done well to consider as they kicked off a closely watched two-day summit in Brussels on Thursday, while Italy and Spain watch their cost of borrowing soar. With France and Germany at odds about whether to address the European debt crisis by pooling eurozone debt or better integrating the region financially and politically, German Chancellor Angela Merkel has already tried to tamp down expectations for this week’s summit, which is expected to produce a stimulus package and plans for a banking union.

“There is no quick solution and no simple solution,” she warned in Berlin on Wednesday. “There is no one magic formula… with which the government debt crisis can be overcome in one go.”

The thing is, when it comes to major EU summits in Brussels, the region’s heads of state haven’t had one go — they’ve had roughly 20 since 2010 (albeit with a changing cast of characters, as 14 of the 27 EU countries have switched leaders since the debt crisis began). And if the previous crisis-management meetings are any guide, we should expect this week’s summit to be long on talk of turning points and short on game-changing results. Here’s a look at what European leaders have accomplished in their previous gatherings — and how they’ve chosen to frame those achievements.

Action: European leaders discuss troubling developments in Greece, which recently announced that its debt had reached the highest level in the country’s modern history and unveiled austerity measures to slash the soaring budget deficit.

Assurances: In a joint statement, the assembled heads of state pledge to “take determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole.” They call on Greece to cut spending and add that “the Greek government has not requested any financial support.”

MARCH 25, 2010

Action: Eurozone leaders work with the International Monetary Fund to create a $29 billion safety net for Greece.

Assurances: Greek Prime Minister George Papandreou boasts that the package “guarantees the protection of financial stability in the eurozone” and that “no other measures are needed” (the German press is no less effusive, with one headline screaming, “Euro crash avoided!”). But EU President Herman Van Rompuy sounds a note of caution. “We don’t view this as a miracle cure,” he says. “It is an important part of the cure, no more.”

MAY 7, 2010

Action: Shortly after bailing out Greece, eurozone leaders hammer out plans to check the spreading sovereign debt crisis. Days later, European finance ministers roll out a $1 trillion emergency package, which includes a European Financial Stability Facility (ESFS) that can provide financial assistance to troubled eurozone countries.

Assurances: French President Nicolas Sarkozy states that the “leaders of the eurozone have decided to do everything in their power to ensure the stability and unity of the currency union.”

Action: European leaders adopt the Europe 2020 Strategy for long-term growth and introduce a new “European Semester” system of economic policy coordination at what one European diplomat dubs a “normal meeting” for a change.

Assurances: “We are sending a clear signal to citizens and to the markets and also to our partners: We will consolidate our budgets and reduce our debt, without strangling our economies and putting people’s well-being at risk,” European Commission President José Manuel Barroso declares in a statement

SEPT. 16, 2010

Action: In a summit overshadowed by France’s crackdown on Roma migrants, the European Council does not dwell on the debt crisis.

Assurances: In a high-minded reflection on the region’s economic governance reforms, the council issues a statement welcoming the “important progress made … on the development of a new macro-surveillance framework to monitor and correct unsustainable competitiveness divergences and imbalances in a timely manner and on the strengthening of national fiscal frameworks.”

OCT. 29, 2010

Action: European heads of state endorse new budget rules and discuss amending the EU;’s Lisbon Treaty to create a permanent system for responding to financial crises.

Assurances: “We are doing everything to ensure that there will never be a repeat of the crisis we have had,” Merkel explains. “One can already say that the euro will be strengthened.

To continue reading this article, visit foreignpolicy.com. [Copyright 2012 Foreign Policy]

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