Fri Mar 2nd, 2012 at 03:25:53 AM EST
From Eurointelligence this morning (e-mail bulletin):
The big story of yesterday’s EU summit is that the fiscal treaty is already collapsing. You don’t find this story in the summit declaration, but in the desperate and futile attempt by Mariano Rajoy, the Spanish prime minister, to persuade his colleagues to move the Spanish deficit target, which he cannot conceivably meet, without destroying his country’s economy. Rajoy faces the choice between breaking the target, and leading Spain onto a trajectory that is not consistent with monetary union.
Spain's request for a revised deficit target - the current target is 4.4% down from last year's 8.5%, an ajustment of €44bn which even Rajoy the conservative said "would destroy the welfare state" - met with no support at the summit. "We can't start the fiscal pact by granting exceptions", said, more or less, Sweden and Finland. The result, of course, is that Spain will not meet the target. Fiscal pact, non-starter.
So essentially, the eurozone follows a position that everybody knows is unfeasible, for fear of losing credibility. Nobody in Brussels wants to own to the fact that austerity is not working.
The Ship of Fools sails on.