The world is freaking out about Eurozone debt again, but fundamentally nothing has really changed, argues The Economist.
The latest ‘crisis’ was simply sparked by Germany’s latest push to create new Eurozone debt bailout rules, which fuelled market uncertainty given Germany’s less-than-clear demands relative to how much pain creditors should be forced to bear.
Markets have known for a while now that Ireland’s bank bail-outs are going to be bigger and costlier than expected, and that knowledge brought with it a blow to market confidence in Ireland’s ability to pay. But German leaders made a bad situation much worse, by pushing Europe toward talks on a debt restructuring mechanism without ever making it clear what it might want from creditors—or the Irish government.
Well, it’s not clear that Ireland can’t pay its debts, painful as they may be to bear. Portugal and Spain have more work to do. But the stability of the euro zone is primarily a political question. Germany seems to be willing to keep struggling peripheral countries afloat so long as they suffer and become more German in the process, and so far those struggling peripheral countries have proven surprisingly willing to suffer and become more German. Who’s to say this can’t continue?
Thus the current crisis is really just a political problem which has the potential to clear up quite quickly. It has all happened before, just earlier this year after all.