Euro Zone Crisis: Italy Wins, Germany’s Out

Italy surprised everyone with a 2-1 victory over Germany in the Euro 2012 in Warsaw on Thursday night.

In Brussels, in the wee hours of Friday morning after thirteen hours of talks, German Chancellor Angela Merkel agreed to direct refinancing of banks. EU leaders agreed to use the euro zone’s bailout fund to give direct support to struggling banks, a measure first to be used to bailout Spain’s banks but that could possibly also be applied to Ireland.

They also agreed to create a joint banking supervisory body for the euro zone; they will begin to implement these decisions on July 9.

In addition, countries requesting that a bailout fund buy their debt (lowering their borrowing costs) will not be subjected to the sort of monitoring programs imposed on Greece (which was able to obtain a severe write-down of its debt).

With support from French President François Hollande, Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy raised the pressure on Germany by refusing to approve a growth pact of €120 billion ($149 billion), asserting that there must first be EU measures to lower their borrowing costs.

Spain had asked for a bailout of up to $125 billion for its banks but was seeking that the funds go directly to the banks, rather than being added to the national debt.

However, Merkel did not yield ground about mutualization of debt; sharing debt burdens is a deeply unpopular measure among Germans, who resist the notion of having to pay for the debt of other euro zone countries. She has also been able to make sure that Brussels has greater control over the finances of euro zone countries.

Bloomberg heralded Merkel’s compromise as a sign that Germany, after many statements to the contrary, may actually “be willing to do what it takes to save the euro.” Later on Friday, Germany’s lower house of Parliament, the Bundestag, approved the measures.

The euro rose against the dollar after the news was announced.

Italy’s Monti, routinely described as a technocrat, showed deft political skills in the talks. Said the German Der Spiegel, with a none too subtle reference to Italy defeating Germany, a win that meant Germany’s elimination from the championship and thanks to another Italian named Mario (Balotelli):

As in football, so at the euro summit: Italy has won out on key points in a long night of negotiations in Brussels, Chancellor Merkel gave way.

Gloom and doom predictions to the contrary, this week’s euro zone summit might actually mark a turning point in the 30 month economic crusts that began in 2009 in Greece.

Might.

Previous Care2 Coverage

Euro Zone Crisis: No More Merkozy At Day 1 of Summit

Euro Zone Crisis: Why Put a Dog “In Charge of the Sausages”?

Euro Zone Crisis: A Plan For the (Sort Of) United States of the Euro?

Photo by abdallahh

34 comments

Katie K.
Katie K5 years ago

It reminds me of a monopoly game. Who's trustworty? Good luck because if they go down the tubes they'll take us all with them. Never forget "misery loves company".

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John Mansky
John Mansky5 years ago

Thank you for the article...

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Berny P.
Berny p5 years ago

just wait for the immigration to increase !!!!!!!!!!!!!!!!!!

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Ian Fletcher
Ian Fletcher5 years ago

More member states working together is improving mutual understanding throughout the EU.
All these summits will eventually improve and tighten links between EU states so that even if some states opt to leave the €, the EU will go on.

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Roderick D.
Roderick D5 years ago

I agree with Sharon H, and Monica R. What is never mentioned about the Euro Zone is the devastating effect it had on the cost of living. 1 Euro here is worth 6 of our old currency and what happened to prices was that if it cost 6 old currency it now cost 1 euro or else the size of items was diminished so instead of getting say 12 disposable diapers you'd get 9, instead of 250 g you'd get 200 g etc. The population here was overwhelmingly against the euro but we were not allowed to vote on it. Now we are having to pay the debts of Greece, Ireland, Spain, Portugal et al through increased taxes and slashed services all because we had a strong economy and were less affected by the current banking crisis caused by the US sub-prime mortgage fiasco. Is it any wonder that one-third of voters voted for the party that was against the EU in a recent election.

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monica r.
monica r5 years ago

Look, it's a failed experiment. The sooner they go back to being individual countries with separate economies and borders you need a passport to cross, the better it will be.

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Jennifer C.
Past Member 5 years ago

Noted. Thanks.

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Jonathan Y.
Jonathan Y5 years ago

Menage a trois of the major Catholic countries vs. Germany? Sounds like the Counter-Reformation, except this is a liberal coalition. Kudos to Merkel and her negotiating team for being reasonable about it.

The article evidently meant to end with "...the 30 month economic crisis that began in 2009..." although I do like French crusts!

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michele may
michele may5 years ago

euros and football?

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