European Union Gets a Vote of Confidence ; Currency Crisis Eases on German Court Ruling and Dutch Elections

By Erlanger, Steven | International Herald Tribune, September 15, 2012 | Go to article overview

European Union Gets a Vote of Confidence ; Currency Crisis Eases on German Court Ruling and Dutch Elections


Erlanger, Steven, International Herald Tribune


The rejection of an exit from the euro zone by Dutch voters on Thursday, which comes after Germany's Constitutional Court backed a bailout fund, is the latest sign of support for Europe's crisis measures.

There was a general sigh of relief in the European Union this week. The cause was not better performance in the troubled and highly indebted southern countries of the euro zone, but crucial decisions made in the rich northern nations with perfect credit ratings, where skepticism about the common currency is running high.

On Wednesday, the German Constitutional Court found a way to declare that the permanent bailout fund, the European Stability Mechanism, is legal, clearing the way to use it in time to recapitalize troubled banks as well as governments. And the Dutch voted for mainstream parties in a parliamentary election, choosing not to be enticed by parties wanting to leave the euro.

Combined with the European Central Bank's decision to restart its bond-buying program in return for more budget discipline, immediately lowering interest rates on Italian and Spanish bonds, European leaders could begin to feel that perhaps the worst is over in the euro crisis, at least for now.

"With the Dutch shying away from anti-European parties the same day the German Constitutional Court rules in favor of the E.S.M., Sept. 12 seems to have been a good day for the euro," Dimitry Fleming, an economist at ING Bank in London, said in an analysis via e-mail.

Not all is well, of course. Greece remains a mess and will probably need even more money. A decision keeps being postponed about when, and whether, to grant Athens another big portion of loan money it needs to stay afloat.

The Germans remain deeply anxious about the central bank's effectively printing money and building up larger stocks of shaky bonds. And there is reluctance among some nations, especially Germany, about the mechanism and scale of a Europe-wide banking regulator to try to prevent another crisis, particularly in Spain.

Then there is significant division over just how far to take the idea of European fiscal and political integration, let alone union. In a speech Wednesday, the European Commission's president, Jose Manuel Barroso, pushed for "pooled sovereignty" and an E.U. "federation of nation states that can tackle our common problems through the sharing of sovereignty in a way that each country and each citizen are better equipped to control their own destiny."

Any major changes would require another treaty, which would mean some difficult parliamentary votes or referendums. Germany has spoken of a treaty change to be ratified by referendum, but France, even under its Socialist president, Francois Hollande, is dubious about sacrificing too much sovereignty, let alone engaging in a vote.

In 2005, the French Socialists split over a new treaty for a European constitution; Mr. Hollande supported it, but Laurent Fabius, the current foreign minister, did not. And the proposal lost badly in a referendum, dooming the constitution. So there is considerable wariness in Paris about too explicit an integration.

That will be true in the Netherlands, too. The Dutch prime minister, Mark Rutte, one of the few European leaders to win re- election during this crisis, is hardly a fan of European integration. …

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