European Student Think Tank

Italy is going to elec­tions by the end of this month after 14 months of technocratic-ruling admin­is­tra­tion. Pier Luigi Ber­sani, the center-left can­did­ate has a good chance of becom­ing Italy’s next leader and couple of days ago I atten­ded a short, yet very mean­ing­ful speech of him at the Ger­man Coun­cil on For­eign Rela­tions in Ber­lin. Pro-European, sharp and thought­ful, he delivered indeed a strong message.

While the ECB’s latest bond-buying scheme OMT has been greeted with enthu­si­asm in most of Europe, Ger­man politi­cians, eco­nom­ists and media remain scep­tical. The main reas­ons for this are con­cerns about infla­tion and dif­fer­ent Ger­man cent­ral bank­ing tra­di­tions, which raise gen­eral ques­tions about the ECB’s mandate.

While the rampant inferno of the fin­an­cial crisis has been tem­por­ar­ily con­tained, Fin­land has recently stunned EU lead­ers, who have been pro­mul­gat­ing the import­ance of the fin­an­cial bail­outs for both Greece and Spain by con­tem­plat­ing a Finnish exit from the euro­zone. Henri Erti explains why Hel­sinki believes this might be wise.

The fin­an­cial mar­kets have been sub­ject to con­sid­er­able cri­ti­cism in the last weeks; ana­lysts are wor­ried that fin­an­cial con­sid­er­a­tions will dic­tate decisions that should be taken via a demo­cratic pro­cess. By ana­lyz­ing the reas­ons and the effects of the cri­ti­cized beha­vior the con­clu­sion must be drawn that Europe in the long term should be grate­ful for the present warn­ings of the market.

Con­trary to com­mon per­cep­tions, the so-called Euro-zone crisis is far from affect­ing only the sev­en­teen coun­tries of the single cur­rency. The effects of the crises can be felt even fur­ther, out­side Europe. African coun­tries that have barely recovered from the troubles of the 2008 fin­an­cial crisis, already real­ise that they may also be indir­ectly affected in, at least, two dif­fer­ent ways by the Euro-crisis.

Closer cooper­a­tion of the eurogroup coun­tries, though neces­sary, cre­ates the risk of cre­at­ing ser­i­ous rifts in the EU, leav­ing it more than ever divided between insiders and out­siders. How­ever, even though more integ­ra­tion of the eurogroup in the fields of eco­nomic, fin­an­cial and social policies should be welcom

Euro­zone lead­ers have agreed to boost the European Fin­an­cial Sta­bil­ity Facility’s lend­ing capa­city to one tril­lion euro, believ­ing that this should calm mar­kets and pre­vent the “con­ta­gion” from spread­ing to Italy or Spain. How­ever, there’s neither an agree­ment yet on how to “lever” the EFSF, nor on who is going to pay for it. A short over­view might shed some light on the issue.

The European pro­ject is stalling. Some won­der if Europe is up to the task of deal­ing with the cur­rent crisis in the euro­zone, the dis­cus­sion over the Schen­gen Agree­ment, the Arab Spring devel­op­ments and the rela­tion with the United States. His­tor­ian Timothy Gar­ton Ash (author of In Europe’s Name: Ger­many and the Divided Con­tin­ent) is one of them. In the Guard­ian he recently stated that Europe needs a strong ‘Ger­man engine’. Angela Merkel has to show lead­er­ship in order to regain Europe’s momentum.

Greece, Ire­land, now Por­tugal. The euro­zone crisis con­tin­ues and wor­ries per­sist that the bail-out pack­ages provided by the EU and the IMF won’t solve the prob­lems of the peri­pheral euro­zone coun­tries. Can privat­isa­tion pro­grammes and cuts in social spend­ing really save those crum­bling eco­nom­ies? I would not bet on it and pre­pare for the worst.