There’s a lot of small print to digest about the latest definitive euro deal, and as usual Open Europe’s Mats Persson is way ahead of the curve in working his way through it. Here’s how he begins his latest Telegraph piece:
Judging from some media reports across Europe – and some positive market reactions, the eurozone crisis has just been solved. Italy and Spain scored a massive victory over Germany. Angela Merkel has caved in. Berlin has blinked.
Hardly. Though Merkel took a bit of a beating and some unexpected progress (the term is used loosely) was made, the primary achievement was to shift yet more of the burden from banks and governments in the south to taxpayers in the north, via the eurozone bailout funds. Nothing fundamental has been solved.
Indeed. And it wasn’t going to be. The real question is what signals have been sent on the direction in which the euro zone is going. Today’s market europhoria reflects relief that more help may be on the way for the Spanish banks and it reflects belief that (ultimately) debt-pooling is on the way. The former looks rather clearer than the latter. For now, the most interesting question is whether this revived confidence in the currency union can feed upon itself. The history of the last two years would suggest that it will not.
If you want to look at one gauge of confidence, continue to keep an eye on what’s happening with Greek bank deposits. The latest indications are that some money is being switched from mattress to bank, but the numbers are still very small when compared with the massive withdrawals Greece saw in May.