People beg at the entrance to a Lisbon church. About $4 trillion has been… (Jose Manuel Ribeiro, Reuters )
Reporting from Frankfurt, Germany — As the bailouts of Greece, Ireland and Portugal are dwarfed by new worries about economic weaknesses in heavyweights such as Italy, Spain and now France, there is little agreement among Europe's leaders on how to fix the problem.
Investor fears about a possible downgrade of France's triple-A rating fueled a heavy stock sell-off Wednesday that quickly spread to U.S. markets. The markets appeared to stabilize Thursday.
Jorgo Chatzimarkakis is a member of the European Parliament's budget committee and a member of the executive committee of the Free Democrats, the junior partner in Germany's governing coalition. He told the Los Angeles Times that the failure of European politicians to make quick decisions, combined with the recent U.S. credit downgrade, is fueling market anxiety about the Eurozone's debt crisis. The solution, he said, is closer integration.
Are the concerns that Europe's debt crisis is getting worse legitimate?
I think there's a worldwide debt crisis and any fears are legitimate. But the fear that the Eurozone will break up is not legitimate.
The nervousness in the market to a high extent has to do with the American crisis. The Americans reacted in a very short period of time. The problem is that the Europeans have not reacted immediately. It's not one voice that is speaking. Also the leading power, Germany and [Chancellor Angela] Merkel, have taken a long time to understand the crisis.
Are European politicians ready to implement unpopular cost cuts?
It depends on the respective country. In Greece, people were full of hope in the beginning, but after one year, the first Greek [bailout] package did not work very successfully. They finally understand that cutting and austerity is not the solution. You need on the other hand to fuel economic forces, and that's only happening now.
The Irish case is very different because it has much more to do with the banking system than with debt. Italy has made some fundamental changes in a very short period of time.... Unfortunately the markets are not that well-informed. The nervous way they are reacting is not based on facts, but on feelings and psychology. That's why it's so crucial that the political reaction comes fast.
There seems no end to the crisis. In your opinion, what's the way out?
We have to change the way we use public money. The question goes not only for Europeans, but Japanese and Americans. We have to find new possibilities to generate money for public projects, like project bonds, which are more oriented to a project and not a state. And Europeans need to think about issuing Euro bonds, (under which all members of the Eurozone would stand behind debt rather than individual nations).
Is the Eurozone moving toward a so-called "transfer union" where richer, stronger countries like Germany subsidize the weaker ones like Greece?
No. We've had a transfer union since the 1950s. If you look at agriculture policy in the EU, France benefited much more from agriculture funding and transfers via the EU than any other country. To come up with fears now about a transfer union is very wrong.
It's mainly the Germans, Dutch and Finnish who have come up with that idea. They talk about the moral hazard. But the Germans should sum up the big wins they have had due to the European Union. They profit from [exporting to] other markets. … If the Greeks and the Irish and Portuguese don't buy German products anymore, then the Germans will have a loss, also.
Is the answer closer fiscal integration and the creation of a European finance ministry with the power to set taxes, deficits and debts of members?
Europeans need to think about having a common Finance Ministry. The only way for Europeans to tackle the problems is to integrate even more in the financial sense.
Is that politically viable? Are countries ready to give up their autonomy?
Europe can only play on a global level if it gets more together and integrates even more. I foresee that we will have the revival of an old idea, that we will have a core Europe that possible integrates even more and goes for a common and single financial policy, and a wider Europe that is less integrated.