Missing the target

Friday’s summit of eurozone leaders resembled a darts game in which the 17 players aimed at the board’s lowest numbers rather than scoring the bull’s-eye needed to overcome the region’s debt crisis. It focused on proposals to tighten fiscal discipline, raise competitiveness and enhance economic policy co-ordination. It had little or nothing to say about the weakness of Europe’s banks and the spectacular misallocation of capital by the private sector that contributed to the crisis. With the eurozone’s most vulnerable nations once more under siege this week in bond markets, the summit looks dangerously like a wasted opportunity.

The clearest message was that Germany and a handful of like-minded creditor countries are determined to foist their narrow recipes for reform upon troubled “peripheral” nations such as Greece, Ireland and Portugal. The German-led group wants its pound of flesh in the form of more austerity, the adoption of binding fiscal rules at national level, and an overhaul of state pension systems and labour markets. Such actions are a precondition for German agreement to expand the size of the European financial stability facility, the eurozone’s emergency fund, and perhaps to soften the terms of last year’s Greek and Irish rescue packages.