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Eurozone crisis

EU happily closes the books on tumultuous 2012

For a whiplashed EU, the 2012 rollercoaster is finally gliding back into station. Along the way, members picked up a Nobel Prize and fistfuls of debt. Yet many are still left wondering: What just happened?

At the beginning of December, it still looked as if the EU would enter the new year more divided than ever before. Yet at the last EU summit a sense of momentum was palpable.

The union of European countries is no longer as fragile as it was at the beginning of the year, even if many problems do have yet to be solved. The debt crisis was 2012's dominant force, relegating everything else to a sideshow: the civil war in Syria, the sharpening of the Middle East conflict, the upheavals in Egypt.

Two red, white and blue flags hang next to the blue and yellow flag of the EU
(Photo: Marina Maksimovic/DW)

The EU had no time for Croatia (middle) or Serbia (right)

Even for issues closer to home, such as the European integration of Serbia and other states of the former Yugoslavia, the EU had neither the attention nor the energy. Sometime soon, Croatia will become an EU member. Yet at the latest EU summit, Chancellor Merkel stated explicitly that it's the wrong time, due to the fact that "we'll be looking more closely at [Croatia's] economy and competitiveness."

Everything, at least for now, must be subordinated to strengthening the monetary union.

Doom and gloom

Some have spoken of the crisis having already reached its peak. And if one would like to pinpoint when that took place, exactly, it was earlier this year. At that time EU Commission President José Manuel Barroso warned against believing "that the European project and its achievements are not irreversible."

Parliamentary President Martin Schulz also saw in the high levels of unemployment amongst Europe's youth, "A shame, and one that drives an ax through all of Europe."

Doom and gloom predominated. Some even talked of the end of the euro.

Thoughts of a Greek exit

Dark stormclouds gather close to the acropolis
(Photo: © anastasios71 #36235068)

The weather for Greece was sunnier in December than in June

The country on the receiving end of many of the warnings, wails and good wishes was none other than Greece. A second international aid package is now working its way through the Greek economy; private lenders have already taken write-downs on outstanding Greek loans. That is now, and yet in the fall the givers of Greek aid were forced to wait to see if anything resembling credible austerity and reform legislation would also work its way through Athens.

European Commissioner for Economic and Monetary Affairs and the Euro Olli Rehn summed it up succinctly. "The country," he said, "lived beyond its means for a decade."

Athenswas told, at times, to quietly leave the currency zone. In May, Austrian Finance Minister Maria Fekter advised Greece to exit the European Union entirely and only then start working on re-entry. "Then we would find out if Greece was actually ready for entry at all," Fekter said. Her words were a clear reference to the falsified financial figures Greece used to enter the currency union.

ECB reassurance

Mario Draghi in front of a symbol of the euro currency
(Photo: no info)

Whether sinner or saint, Mario Draghi sought low interest rates

And yet in summer, the course of a euro rescue changed dramatically. Mario Draghi, president of the ECB, suddenly announced an emergency measure to purchase unlimited quantities of sovereign bonds from hard-hit Euro members. The aim was to lower interest rates. For Jens Weidmann, president of the German Bundesbank, its central bank, the move remains the greatest sin to date. Others, however, see in it a rescue of the euro that politicians by means unpalatable to politicians.

The cracks began to show at the EU summit. Together with Italian Prime Minister Mario Monti, the new French President, Francois Hollande, decided that European austerity measures that had been accepted until that point needed a round of softening. After the summit, Angela Merkel was portrayed as the loser in those negotiations. The atmosphere in Europe was icy.

As Rebecca Harms, co-chair of the Green Party in European Parliament, concluded: "So long as we discuss whether Mrs. Merkel took a beating or Mr. Monti won, or whether the South beat the North or the other way around, I don't believe that we're on the right path out of the European crisis."

A common fate

The Nobel Peace Prize award for the European Union also did little to improve the bitter atmosphere; quite the opposite, in fact.

In November, things heated up once more due to the fact that countries could neither agree on EU budgets, the latest Greek aid package, nor a future course of the euro rescue.

Yet over the last few weeks, a sense of recognition seems to have dawned on all parties involved that they are, in fact, sitting in the same boat. The end of the year has brought wide-ranging consensus - a striking difference from the year's beginning.

Angela Merkel looks promisingly up and off camera in front of a blue background that reads, in German, European.
(Photo:Michel Euler/AP/dapd)

Merkel will face a slew of new challenges in 2013 - election year in Germany

The eurozone will not break apart; no country will exit; and even the long-term 'cost' of transfers from resilient countries to the not-so-resilient countries appears to have been agreed upon.

In exchange, receivers of such aid are obliged to structural reform. Without such joint measures of force, not only is the euro in danger, said Chancellor Merkel in a statement in Brussels in autumn, but Europe will become dependent on other regions of the world. "If we simply close our eyes, then together we can't guarantee prosperity for future generations," she said.

Not everyone appreciates such mutual dependence, though. Powerful national currents are gaining popularity in some countries.

But for many, a sense of a shared European destiny has strengthened by the end of 2012.

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