International

SP Member of Parliament Ewout Irrgang does not believe that the agreement sealed during the night represents a solution to the problem with which the eurocrisis began in May, 2010: the problem of Greece. According to Irrgang the annulation of 50% of Greece’s debt to the banks will not prove sufficient to enable the country to bounce back. He notes that ‘The total Greek debt will fall by less than 28%. Even in 2020 the debt will remain about as high as it was at the beginning of the crisis in Greece.’

The SP Member of Parliament’s view is that the agreement, while better than nothing, still doesn’t amount to a solution. “A few weeks ago Merkel and Sarkozy announced with enormous hoo-ha that they were simply going to resolve the eurocrisis in a month or so. This is indeed an agreement, but no solution to the eurocrisis. It just keeps Greece bumbling along. The eurocrisis began with Greece and the end of the eurocrisis will therefore have to include a real solution for Greece.”

Irrgang believes that the extension of the emergency fund so that it becomes a sort of insurer which may also borrow money from foreign lenders will lead principally to a great deal more risk for the Dutch public. “With a bigger emergency fund continuing to insure and to lend you can indeed give more financial aid. But if things go wrong, as is now the case with Greece, the risks for the Netherlands will also be much greater. The government leaders want to enlarge the emergency fund largely for the sake of Italy, but Italy’s problems must be solved, in reality, in Italy. A prime minister suspected of corruption and links with the mafia is in this respect completely lacking in credibility. It’s high time that Berlusconi packed his bags. With an Italian head of government who can be taken seriously the euro would be more effectively aided by a bigger emergency fund.”

Irrgang is critical of the recapitalisation of the European banks announced at the summit. “It’s good that the government leaders at last recognise that the eurocrisis is also a banking crisis and that the banks’ reserves are far too low as a result of weak regulation. But the IMF was talking about a necessary increase of 200 billion while the agreement only refers to about 100 billion, which creates doubts as to whether this will prove adequate. Bankers, shareholders and bondholders are being handled with kid gloves. A ban on bonuses for banks which are being given new state financial aid applies only to executives and not to other bank staff. Shareholders are being spared to far too great an extent with a slight dilution of their interests through a small recapitalisation. Bondholders remain completely untouched."