Go to ECFR's "Eurozone crisis" page
He is young and experienced, but - most importantly - he is a truly European. Enrico Letta, 46, the new Italian Prime Minister, is probably the last chance Italy has to avoid new elections. In a country paralysed by stagnation and where enterprises shut down every day, his first address was significant: "austerity measures” he said “have reached their limits." He also quoted President Barroso where he pointed out the urgency to place stronger emphasis on growth, including in the short term.
My bet is that European partners, as well as international markets, will like him. Letta has an old connection to the Union: from 2004 to 2006 he was MEP with the Group of the Alliance of Liberals and Democrats for Europe, sitting in the Committee on Economic and Monetary Affairs. At the age of 32 he was Minister for European Affairs under the first D'Alema government (becoming the youngest
Perplexity. That's what’s conveyed by the clash over austerity going on between the European Commission and the International Monetary Fund (IMF).
The debate is as extremely technical as it is profoundly political. In essence, it’s about how much national GDP falls with every point of tax cut. While it may seem rather complex, it’s actually rather simple: depending on the extent of the so-termed "fiscal multiplier", tax cuts can pump an economy back to life – or deflate it.
National and international blogs where economists debate these matters are abuzz with analyses and counter-analyses that attack and defend the austerity policies pursued by the EU. The problem is not just that the discussion about the fiscal multipliers has reached levels of complexity that delight only academics. The issue is that,
Deaf, inconsistent, and reckless: with these words a furious and tired Giorgio Napolitano, 87, referred to the parliament in his inaugural address on Monday as the reconfirmed (for the first time in Italy history) Italian head of state. He threatened to leave if politicians continue to act with “irresponsibility.” “I have a duty to be frank. If I find myself once again facing the kind of deafness I ran into in the past, I will not hesitate to draw the consequences,” he said, sounding like a teacher scolding his pupils. The warning was welcomed with warm and prolonged applause. It was a public admonishment over continued negligence that had hurt the country just as it had benefitted the political parties for many years.
The reconfirmation of Napolitano came after days of uncertainty and division. Notwithstanding his age and his stated desire to retire, Napolitano had no choice:
Spain’s foreign policy is in a critical state. Due to the crisis, true; but also due to decisions made in recent years. We need only take a close look at the three pillars that sustain the exterior action of any country: diplomacy, defence and development. As for diplomacy there are a number of elements that have combined to create the present situation. Most obvious of these is the crisis, which has had a serious impact on Spain’s capacity for international action. Spain, which always had to jockey for elbow room between the big states of the EU, now has a hard time not just being influential but merely being heard in Europe, not to mention outside it.
The crisis has also relegated the Foreign Ministry to a back seat in favor of Economy and Finance, whose decisions are now the ones that count internationally. This tendency, which is general in Europe, means that foreign ministers,
Like Ireland, Iceland and the UK, Cyprus epitomises an economic model that favours the expansion of the financial sector at the expense of others. As we’ve just seen, once crisis hits the fragility of the model is clear for all to see. For Cyprus a downsizing of the sector makes sense (despite the opposition of vested interests), with other opportunities presented by off-shore gas reserves. But the situation in Cypriot has also provided us with some important lessons about how the EU and its members should deal with their financial sectors in this time of crisis.
Cyprus has fuelled the discussion about whether tax havens (and off-shore banking) should be accepted in the eurozone (or in the EU), even beyond considerations about money laundering and tax evasion. Arguably, they should not be. The argument that money in general would move elsewhere in the world is not convincing.
Europeans are losing faith in the EU
Europe can rescue the two-state solution
27 countries in search of a proper security strategy
How Europe can help Egypt
Understanding the influence of the Gulf States
A new era for EU-Georgia relations?
What next for Egypt, Tunisia and Libya?
What does China think about the island dispute?
A comprehensive evaluation of European foreign policy
How the euro crisis has affected politics in 14 EU member states
Do EU sanctions work?