Thursday 22 March 2018

Two-tier Europe doesn't mean two-speed currency

Power to punish states who break monetary rules will be required to shore up the euro, writes Marc Coleman

THROUGHOUT this crisis the European Central Bank has been called on to come to the rescue of the euro by acting as lender of last resort. Last weekend, I predicted that central bankers would save the euro. To date, the ECB remains opposed to any role as lender of last resort. But is that opposition really principled and permanent, or tactical and temporary? A surprising development last week suggests the latter: before they can become lenders of last resort, central bankers must become leaders of last resort. Let me explain.

It isn't every day a former colleague becomes Greek prime minister, but last Thursday it happened to me: at lunchtime proverbial white smoke emerged from the Greek parliament along with the cry of "Habemus Papam", the Papa in this case being former ECB Vice-President Lucas Papademos. There is an ocean of difference between Papademos and his predecessor Papandreou in terms of ability to unite Greece's parties, steer the economy to safety and mend fences with the ECB.

In Italy, too, the leadership factor has drastically improved. In November 1942 Churchill described Italy as "the soft underbelly of the axis", a description that seems to resonate in November 2011. But appearances deceive.

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