Richard Werly, returning from Strasbourg after the plenary session of the European parliament, hosted a webinar on the euro crisis live from Paris last Friday. Here are the main points:
Can Angela Merkel save the EU?
This is a very timely question, coming right after the German constitutional court decision on 12 September to validate the European Stability Mechanism (ESM), the future European Monetary Fund.
Overall, the question of German leadership in Europe is at the centre of all scenarios. Financier George Soros has recently urged Germany to lead the euro or leave it. It’s a good point. Our assumption is that, after three years of hesitations, Angela Merkel has clearly understood that to remain strong, Germany's economy needs a solid/robust euro zone.
The question now is not to figure out Germany's commitment to the European Union but the conditions that Berlin will continue to posit. Our assumption here is that Germany is betting on a GREXIT scenario in 2013, once the financial markets return to normal. In this context, the German elections planned for 2013 will be crucial for Europe.
In the aftermath of the German constitutional court decision, what can we expect for the European rescue funds?
The question now is to know when those rescue funds will become operational. Despite remaining divergence within the EU, our assumption is that the ESM will enter into force at the beginning of 2013. Otherwise, the European Central Bank’s (ECB’s) readiness to intervene on the bond market would have no effect. The ECB has indeed put as a condition for this intervention that countries in need of assistance should first conclude an agreement with the ESM.
Are we witnessing an era of undisputed German leadership within the EU?
Yes, and in this regard, 2013 will be a crucial year with the forthcoming German election. The good news is that Germany has, again, understood the need for a robust Europe. The debate, nevertheless, will remain a tough one in a country where the general feeling is that Berlin remains too soft on indebted countries.
We shall expect a resurgence of German conditions as we approach the general elections in 2013, but overall, German commitment to the euro now seems the irreversible mood.
To view/download an audio and video recording of the webinar, click here.
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