Monday 22 January 2018

David McWilliams: Since the summit, it's the Germans against the rest

First off, however it happened, the Government should be applauded on keeping Irish concerns on the EU's agenda. Clearly, the Italians and the Spanish did the heavy lifting for us. Had the Spanish and Italians not been in serious trouble, the Germans couldn't have cared less about us. But a deal is a deal and one on debt sharing for Irish bank debt is a huge result. It might seem premature to talk of "results" but now we have a great chance to reduce our odious debt burden.

The EU -- which is all over the shop right now -- needs some class of victory for a set of policies that are falling apart. So it might not be so unusual that it has grafted Irish concerns onto the greater Italian and Spanish dilemmas. In addition, given the ECB's role in bullying a bust Irish State into paying unsecured bondholders in October 2010, Mario Draghi, the new boss, might be trying to clean the slate.

So this is all good, but one thing is clear: the eurozone is in serious trouble and whether it survives is still 50/50. The Italian and Spanish governments are now being charged four times more than Germany to borrow. This can't go on for very long. It makes a mockery of the term monetary union. It is, in fact, an exercise in monetary apartheid, where one set of economic citizens is treated totally differently to another. Quite apart from the ludicrousness of the situation, the present penal interest rates on the periphery versus the historically low rates in the core will ultimately make the recession worse all over the eurozone.

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