Eurozone finance ministers and other politicians are banding together to defend the euro as 2010 draws to a close.
The troubled eurozone countries have seen the single currency come under severe pressure throughout 2010. First Greece, and then Ireland, required billions of euros from Europe’s rescue fund in order to avoid national debt defaults.
In December 2010, Germany’s Finance Minister Wolfgang Schaeuble restated his determination that the euro will not collapse and that the eurozone nations are ready to support the flagging single currency. In an interview with German newspaper the Bild am Sonntag (12th of December 2010), Schaeuble warned international speculators not to bet against the euro.
“All those responsible in Europe agree” he said. “The euro is to all our advantage and that’s why we will successfully defend it. Those who bet their money against the euro will have no success. The euro won’t fail.”
Schaeuble was commenting ahead of a pre-Christmas European Union summit which will set up a permanent rescue mechanism aimed at shoring up failing European economies as necessary. The need for such a fund became clear in 2010 when Greece came close to defaulting on its national debt. The euro weakened against other major currencies and there was much international speculation about the possible collapse of the euro. Not only Greece but Ireland, Spain, Italy and Portugal had unsustainable national debts. Some pundits predicted the collapse of the euro in 2011. Others said that Portugal would need to be thrown out of the single currency at some point during 2011. Suddenly the underlying problem in Europe – that the single currency cannot mask the gap between the stronger and weaker economies – was dramatically exposed. To solve the immediate crisis, the Greek government received billions of euros from eurozone nations and the International Monetary Fund. In return, Greece was made to implement an austerity programme, cutting its unsustainable public spending levels.
In December, the Irish economy was also bailed out by other eurozone nations, receiving a loan in excess of 70 billion euros. Again, stringent public cuts and other financial conditions were imposed.
Amid speculation about the future of the euro, German chancellor Angela Merkel, French president Nicolas Sarkozy and other European leaders began hammering out the terms of a permanent rescue fund to allay market fears about heavily indebted European economies.
Greece and Ireland continue to have huge economic problems and Portugal, Spain and Italy will continue to struggle with their national debts during 2011 and beyond. Nevertheless, the Portuguese prime minister, Jose Socrates, has joined Wolfgang Schaeuble in stating that the euro will not collapse. All of Europe’s leaders are committed to defending the single currency, he told Portuguese daily Diario de Noticias ahead of the EU summit meeting. Denying that Portugal would be the next eurozone nation to seek a rescue package, he added:
“Our problem is just a budgetary problem that we have to correct….There is no reason for the IMF to enter Portugal, because Portugal does not need that…we know exactly what to do and we do not need someone to come and tell us what we should do.”
“The way we have to defend [the euro]” he added “is by meeting our budget targets. That’s what we are doing.”
The New Year will reveal how successfully Portugal and the other weak European economies restructure. 2011 will also show whether international markets can be convinced that the European leaders’ rescue fund can save the euro from collapse.