This book is a “disgusting litany of false arguments”, announces Frankfurter Rundschau. The German daily notes that Sarrazin, who worked for the IMF, the German Ministry of Finance and the Bundesbank, should have some mastery of the subject, which “he fails to address” –

Sarrazin constructs an opposition between an efficient Northern Europe  and a chaotic South   –  between workers and layabouts, and whites and dark-skinned people. He refers to countries which he claims behave irresponsibly as “Club Med” states. And where does he situate France? In this Club Med! […] As an adversary of the euro, he puts forward a theory as to why Germany has been pro-European until now: the Germans’ persistent enthusiasm for Europe can only be explained by “the moral deadweight of the Nazi era”. This is a book of lies. […] Let’s hope it rots on booksellers’ shelves!

If the radical left-wingers win the 17 June elections and stick to their promise of scrapping the €130 billion bail-out and its austerity requirements, Greece could still stay in the eurozone without financial aid if it introduced a parallel currency. The "Geuro" would come as promissory notes, a form of government-issued debt that can be sold on. It would devaluate sharply against the euro but would allow the government to buy itself some more time to carry out reforms and pass budget cuts... [...] One pre-condition for the scenario to work would be that aid would still come from other euro-countries and the International Monetary Fund [...] Cash-strapped Greek banks would also need to be rescued by creating a European "bad bank" – according to the Deutsche Bank projection.

This "unprecedented decision" comes a month after the second reform of the banking sector and in the midst of a financial storm in Spain caused by doubts about whether Greece will remain in the euro zone. The business daily adds -

The Government needs to accept the truth that ... neither Europe nor the international markets trust Spanish banks, and put measures in place to support them.

The ECB audit, which will be completed in two months, has already reached its first conclusion, says the newspaper: it reflects the "deep mistrust of the role played by the Bank of Spain" in taking back the management of the banking sector reforms. However, it adds -

[In terms of] convincing institutions and investors of the seriousness of Spain’s efforts to clean up its act and ensure the solvency of its banking system, ECB cooperation may become a valuable asset rather than a constraint.

Spanish and Italian 10-year borrowing costs shot up to their highest levels this year, whilst German 10-year bonds yields hit a record low, exacerbating the differences in borrowing costs between European countries to a new high. European stock markets also suffered their largest one-day drop in three weeks.

Aggravating these problems, Moody’s downgraded 26 Italian financial institutions by one to four notches, on Monday night and the cost of insuring against Spanish default hit a record high.

The financial firewall – the European Stability Mechanism – is a  500bn rescue system set up by European leaders. Some analysts are questioning whether this will be sufficient to rescue the larger economies at risk, such as Spain and Italy. Luke Spajic, a senior fund manager at Pimco bond investors told the Financial Times –

It’s looking alarming right now. The market is effectively trying to price a disorderly exit for Greece.

The FT added that calls were mounting for decisive action from European policy makers to avoid more systemically important countries being "dragged down by concerns over Greece."

Echoing German concerns about the ability of the Greek political parties to form a government after the elections on May 6, Der Spiegel explains that "for Berlin, the situation in Greece is reminiscent of the Weimar Republic" and evokes the spectre of the regime that emerged in Germany after the First World War. With its stability undermined, it became a breeding ground for Nazism-

The so-called “shame'”of the Germans at [the conditions imposed by the] Versailles Peace Treaty seems to the Greeks to be echoed in the objectives of the financial recovery conditions demanded by Brussels. As in 1920s Germany, it is the extremist parties who benefit.

While it would be desirable for Greece to leave the euro zone, Der Spiegel notes,

Nobody can force the Greeks to leave the euro. But it is clear that it would be in their own interest. ...The exit of Greece from the euro zone is the only chance for the country to recover. The Greeks would have their own currency, that they could devalue. This would mean imports would be more expensive and exports would be cheaper ... Solidarity between European countries is not tied to membership of the euro, and this is why other countries must help Greece with its huge debts.

The weekly puts forward another argument: The departure of Greece from the monetary union "would be a strong signal to other bankrupt countries: you don’t blackmail Europe".

Suggesting a fiscal union could come about within ten years, Mr Draghi said this would involve the transfer of sovereignty from member states to a central authority.” Such would be the political dimension of the “growth agenda” according to Draghi.

In the view of Le Figaro, the “Growth Pact” promoted by Draghi is expected to balance the “Fiscal Pact” adopted by 25 of the 27 member countries to redress their finances. This growth requires “structural reforms to 'facilitate the work of entrepreneurs’”, notes the French newspaper, adding that “the head of the ECB summed up in three words his doctrine on the issue: 'Flexibility, mobility, fairness.’”

La Stampa believes that in fact “the single currency is trying to change its face” and that –

… if the promises of the last days were to be realised, there would begin a significant reversal of the fundamental functions between the EU and the member states: the responsibility for expenditure would go to the former, and control over budgets to the latter. [Through the European Investment Bank], the EU will fund major infrastructure, capable of boosting employment, at rates much lower than what Rome or Madrid, to say nothing of Athens or Lisbon, would have to pay.

A German finance minister is not the born candidate to preside the Eurogroup. Arithmetic and the balance of power in Europe are against it. In normal times, it would simply be excluded that a representative of the country that is already the strongest member – and which wants, in addition, to impose its national culture of austerity throughout Europe – also be responsible for monetary issues.

In the absence of other candidates, Italy's Mario Monti and the Finn Jyrki Katainen are out of the running because their compatriots already occupy key EU positions (Mario Draghi at the European Central Bank and Olli Rehn, the EU Commissioner for Financial and Economic affairs), Schäuble at least has the required stature, the Munich daily says. Junker, whose mandate ends in June 2012, has already said that he will not stand again. Schäuble, himself, said the next president must come from a country rated triple A by the rating agencies, thus limiting the choice to Germany, Finland or the Netherlands. In the meantime, he will have to wait until June for backing from France – after the presidential and legislative elections.

The European partners are insisting on the credibility of the policy of budget cuts to calm the interminable euro crisis. Europe has made it clear that there is nothing more important than austerity [...] and responded to the challenge of Rajoy. [...] Spain is the new frontier of fear in the EU: too big to fail, too big to be bailed out and too big for the markets to forgo a lynching for violation of 2012’s deficit targets. [...] The punishment is in line with the challenge: everyone was expecting a reprimand [while acknowledging the target of 5.8%], and the Commission has demonstrated that it will not make concessions.

For its part, daily El Mundo interprets Eurogroup’s decision as “Olli Rehn’s revenge". The Commissioner for Economic and Monetary Affairs “had set a course for Spain” –

For the bureaucrats in Brussels, it was particularly abominable that [Rajoy’s] announcement came on the day of the signing of the fiscal compact. [Rehn] has sought to reaffirm his authority in the prism of the new budgetary rules, and that is the argument that he presented to member states to convince them to demand a Solomon-like division of the deviation announced by Rajoy. The result is yet another makeshift solution made in Brussels [...] We were surprised by Eurogroup’s urgent insistence on a further 0.5% cut in Spain, at a time when the 2012 budget has not yet been drafted.

In other words, more than 80 percent of the rescue package is going to creditors – that is to say, to banks outside of Greece and to the ECB. The billions of taxpayer euros are not saving Greece. They’re saving the banks.

For the German quarterly, the ambition to reduce the country's debt from 160 percent to 120 percent of GDP by 2020 is an “illusion”.

The Amsterdam daily says the study is "biased" because the allegedly eurosceptic Lombard Street Research "has failed to allay initial doubts over the impartiality of the study", adding that the study "is not sufficiently convincing when it comes to demonstrating the advantages of a return to the guilder". In addition, Volkskrant notes, the researchers wrongly calculated the Dutch contribution to the European Stability Fund at 10% of the total when it is actually 5.9%. They provide "scant information on the cost linked to opting out of the euro" such the negative effects on exports and on economic growth.

The paper concludes that the debate over the future of the euro is useful but that the Lombard Street Research study does not make much of a contribution -

Due to these omissions, the study is of little use to a serious debate on an eventual return to the guilder. Yet, given the anxiety surrounding the euro, it does not hurt for political leaders to think about all sorts of options, including the consequences of a reintroduction of the guilder.

“The position of Prime Minister Petr Nečas, according to which the budget pact benefits none of us, sums up our position towards the Union: take but do not give,” Tomáš Sedláček writes. Yet, he notes that -

After 1989, Czechoslovakia, followed by the two states which emerged from it, had a single international priority: to get out of the ‘zone’, away from what was left after the implosion of the USSR. We joined the OECD, NATO and the EU to clearly signify on which side we belonged.

But for another economist, Pavel Kohout, also writing in Hospodářské Noviny, the Czech “no” to European budget regulations does not represent a risk to the country. “The treaty does not solve any of the issues linked to the euro crisis,” he argues, adding that it “may help to smooth the way for fiscal harmonisation”. But, while this might be appropriate for France and Germany, harmonisation would be devastating for Czech competitiveness.

Quietly trotting with the herd means paying for the errors of others, such as French or German bankers, for example. Only those that create problems have anything to gain.

Foreign Affairs Minister Karel Schwarzenberg, who backs the budget pact, for his part warned that the Czech Republic is making a strong bid for marginalisation but could still reverse its decision later this year or next year.

... the growing risk in the euro system and proposed a return to the security rules that prevailed before the financial crisis.

A view also reflected in another daily, Süddeutsche Zeitung, which says that by choosing to focus on saving the euro and not simply on regulating inflation, Mario Draghi is become a politician taking many risks. Although this policy is unquestionably favourable to the single currency by causing interest rates to fall and by stabilising the banks in the southern countries, this bailout plan is threatened by a grave danger, the paper says. As was the case with the decisions taken by the former head of the U.S. Federal Reserve, Alan Greenspan, these policies -

... introduce a lot of cheap capital which pours into a number of products and whose prices soar – at first as if by magic – to then brutally collapse. The consequences are millions of people throughout the planet lose their jobs and the banks must be bailed out with several billions of tax payer's money. Draghi's low-interest billions are creating a new financial bubble.

The only solution to avoid such a collapse would be for the ECB to withdraw this money from the circulation before it reaches and paralyses the economy. But that will not be a simple matter to arrange.

The Munich daily along with most of the German press has welcomed the ruling as a victory for democracy –

The Chancellor and her Minister for Finance have attempted to shrink the influence of parliament, placing decisions involving billions of euros in the hands of nine straw men. The supreme court could not accept such a move, and was obliged to rule against it.

For journalist Eric Bonse, the bailout is a “ruthless diktat” mainly of benefit to the banking system, which will escape collapse thanks to the interest generated by loans to the Greek state –

Schäuble & Co. have saved the creditors, not the Greek people. Banks, insurers and investment funds in Germany, France and Great Britain will gain from the deal. In the event of [Greek state] bankruptcy, They would have lost everything. [...] Private creditors, who should have, according to Schäuble, accepted joint liability, have been heavily favoured. It is nice deal for the creditors, and a very bad one for Europe.

The European Commission will be able to deploy its experts unilaterally to countries in need of bail-outs to give technical assistance, along the lines of the “task force” assisting the Greek government by overseeing the implementation of its EU-imposed reforms.

The FT adds that under the new rules -

… the Commission will have wider discretion to issue recommendations about national tax and spending policies, something it usually avoids for countries that are not in breach of existing deficit rules.

The presence of EU teams arriving in countries “experiencing severe difficulties” constitutes a “potentially humbling episode for national governments,” the daily notes.

… even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole over the course of a new three-year, €170bn bailout [€136bn in addition to the €34bn left over from Greece’s first €110bn bailout].

The report also warns that that two of the new bailout’s main principles might be self-defeating –

Forcing austerity on Greece could cause debt levels to rise by severely weakening the economy while its €200bn debt restructuring could prevent Greece from ever returning to the financial markets by scaring off future private investors.

The report suggests Greek debt is likely to fall far more slowly than hoped –

… to only 160 per cent of economic output by 2020 – well below the target of 120 per cent set by the International Monetary Fund. Under such a scenario, Greece would need about €245bn in bailout aid, far more than the €170bn under the “baseline” projections eurozone ministers were using in all-night negotiations in Brussels on Monday.

Monti’s mission matters to everybody, from Wall Street financiers to Chinese factory workers. That’s because Italy’s problems have became the world's problems, and Monti must fix Italy to avoid another global financial crisis. [...] Though the debt crisis in Europe has been raging for over two years, Italy [whose debt exceeds 120% of its GDP] looms as the biggest threat to the embattled shared currency’s survival, because Italy paradoxically is both too big to fail and too big to save. [...] Yet if Italy tumbles into insolvency, it could set off a chain of events that unravels the monetary union and puts Europe’s even grander half-century long democratic integration experiment in peril.

Monti's success is just as crucial for the global economy. The consequences of a default of Italy – and, worse, the collapse of the euro – are almost unimaginable. Italy could spark a financial crisis even more destructive than the one tipped off by the 2008 Lehman Brothers bankruptcy. Shock waves would ripple through global financial markets to every corner of the world, sinking banks and economies along the way. A recession in Europe, home to hundreds of millions of rich consumers, could derail the U.S. recovery and dampen emerging markets. The fates of Mario Monti, Europe and the worldwide recovery have become inexorably entwined.

To Ethnos, which notes that the political parties, whoever they be, "led us to the edge of destruction," believes that the agreement -

... unquestionably gives us the means to avoid the danger of bankruptcy. But it is an agreement that implies long and painful sacrifices for the Greek people, in particular for those sections of society that are economically out of favour. This must be present permanently in the minds of the leaders, so that their actions draw the best from the agreement and avoid the errors and failures of past efforts in order to overcome the crisis.

Negotiations between Athens and the troika on one side and creditors on the other are scheduled to continue this week with the aim of avoiding a bankruptcy with unpredictable consequences.

Calling on Berlin to contribute more resources and guarantees to help solve the eurozone crisis, Cameron was particularly blunt about the introduction of a financial transaction tax – an initiative he described as “quite simply madness”.

His speech, the Financial Times continues –

…reflected British officials’ long-standing and deep frustration with Germany’s leadership of the single currency area and called for a much stronger firewall to prevent contagion within the eurozone, common European sovereign debt and for powerful countries committing to reduce their trade surpluses as much as the struggling countries seek to minimise their deficits.

In the meantime, notes The Times, the PM is also caught up in a “new round of cross-channel tensions” with France.

Cameron and Mayor of London Boris Johnson fear that French socialist François Hollande, tipped to win power in the May presidential elections, could “scupper the EU’s economic rescue plan and undermine the City,” writes The Times.

In a sixty-point manifesto published on January 26, Hollande “promised to rip up the EU’s fiscal treaty, which is due to be approved on Monday,” the London daily notes. He also made the financial industry –

… his main target, with promises of a 15 per cent increase in taxes on bank profits, the banning of trading in “toxic” financial instruments, a ban on stock options, caps on bonuses and a swift tax on “all financial transactions”.

The Mayor of London accused Hollande of “short-term political vindictiveness.”

… led the Commission which collapsed in 1999, after a devastating report on fraud and nepotism attacked the EU's executive body for serious management failings.

All 20 members of the Commission stepped down, in what was described at the time as the biggest crisis in the European Union's history.

Although absolved of direct involvement in fraud, Mr Santer, was criticised for “his failure to impose order on the Commission” the London daily notes.

Defending the decision, Euro Group president and Luxembourg PM Jean-Claude  Juncker declared that Santer, himself a former Luxembourg PM, “served both Europe and his country in the best way possible.” However, according to Martin Callanan, leader of the UK's Conservative MEPs --

Putting Jacques Santer in charge of fundraising is like putting Dracula in charge of the blood bank. Santer's little helpers have dragged him out of retirement to give him another cushy EU job.

At the moment Draghi was speaking, Standard & Poor's rating agency cut the rating of the European Financial Stabilisation Facility (EFSF) from AAA to AA+, based on the January 13 downgrades of several countries that the facility finances.

Given the urgency of the situation, Il Sole regrets that the French President has put off indefinitely a meeting with Italian Prime Minister Mario Monti, which had been expected in the coming days.

After laying claim to a central role for France in the rescue of the euro and of Europe, Nicolas Sarkozy seems to have put the issue on hold. Where the urgency lies for Sarkozy now is no longer in facing the debt crisis with his partners in Italy and Germany and thus sending a strong and clear message to eurosceptics: it’s in avoiding a resounding electoral debacle at home. This is not news: it happened already with Merkel.

Once more, Europe and the financial crisis can wait [...] Due to these delays, the Greek debt crisis is costing so much more than it would have, and the speculators and the agencies and their questionable ratings are continuing to rule the markets.

If it were only about paying the debts of other countries, the Germans would have every reason to refuse. But they’re discovering that the markets, just as they were doling out credit too cheaply to big-spending countries before the crisis, are now rewarding the excessive selfishness of the most thrifty of countries. The deeper the crisis, the more billions of euros Germany is saving by paying excessively low interest rates. Responsibility also means refusing excessive largesse.

Diário de Notícias of Lisbon believes that the first consequence of the cut in France’s rating is that-

... on January 13, the Paris-Berlin axis broke. The Rhine will continue to flow stubbornly on. The struggle for a change in European Central Bank policy will intensify. We can expect nothing good from a desperate Sarkozy and a fearful Merkel on her island, which is sinking under the weight of savings of Europeans in search of a refuge. Europe could have a future: federalism, with prosperity. Political union, with confidence. Instead, it is close to imploding, to poverty, to bayonets. The enemy is not the markets. It is the stupidity of politicians.

In Prague, Hospodářské Noviny writes that S&P has concluded only that “the Emperor has no clothes” – after all, the cut in the ratings of nine eurozone countries had been expected. “The downgrade merely reveals what investors have long known: that Europe as a whole does not work too well. [...] If it is to survive, it must change.” Another consequence of this series of downgrades: the European Financial Stability Fund (EFSF) “is losing its fire power… In essence, the sum of money in the fund that may be used to bail out troubled countries has shrunken from €440 billion to just € 290 billion.”

According to experts, S & P’s announcement will increase the pressure on the European Stability Mechanism (ESM), which in any case was to replace the EFSF [on July 1], to come into effect right away. The advantage of the ESM is that it does not depend on country ratings, because it has its own capital. [...] The cut in France’s rating will strengthen Germany’s role in the operation to rescue the eurozone. Sarkozy is growing weaker. The rescue of the eurozone will be led by Merkel.

In Austria, the press is not kind to the government, which called the downgrade “surprising” and “incomprehensible”. Vienna’s Die Presse wonders where the "surprise" was, noting that Standard & Poor's had given a thumbs-down in December, when it stated that a decision would come in 90 days. The Vienna daily invites the government to-

... change course before it suffers Italy’s fate. [...] In calling the downgrade "incomprehensible", the government is failing to take it into account and is pressing even harder on the accelerator in our race to a new ratings cut.

The same feeling seems to prevail in Slovakia, where Hospodárske Noviny notes that Friday 13 brought bad luck to the eurozone:

Politicians are not doing enough to improve the situation. As a result, Slovakia is paying for joining the euro club. [...] We are under stress from the bailout of Greece and the contribution to the EFSF. The result: political instability and early elections.

Ultimately, remarks the Corriere della Sera, the “mass downgrade” is a statement of mistrust towards the euro that has strong political motivations, “coming from a country [the U.S.] that has always been sceptical about the fate of the single currency.” That said, the “real problem”, according to the Milan newspaper-

... is that these ratings, which should alert investors by pointing out risks they have not yet perceived, in fact come when these alerts have already spread widely among the markets. [...] The well-known message from S&P has emerged reinforced: the European crisis is profound, and there are no easy solutions. The road ahead is long and has plenty of dangerous bends.

In spite of Berlin`s intentions, many countries – like Ireland, Denmark or France – have invoked legal or political difficulties in modifying their constitutions, putting ratification of the EU’s new stability pact in doubt. The new draft treaty, the subject of discussion among national officials in Brussels this January 12, is to grant each country the right to decide how to proceed.

According to the Lisbon daily, new rules will be implemented on 1 January 2013. Eurozone states will not only be obliged to have eliminated current budget deficits, but also to ensure that budgets are balanced from then on.

We are "closer to a European consensus", writes Público in its editorial, adding that the new treaty should be approved before the end of January by all EU members, except the UK:

Things will not go exactly as the Germans wanted. A concession… was made for the sake of the main goal, which is to have the new budget agreement signed as soon as possible. The roadmap for the German plan to combat the euro crisis requires speed and the new rules will be included in permanent legislation of the member states.

Mario Monti’s Italy has been welcomed by Germany, and the outline of a European treaty under discussion no longer appears to be a threat. […] Put simply, Monti told Angela Merkel that he fully understands German obstinacy on the issue of the discipline and efficiency of other eurozone countries, even if this means leaving them to wait on the brink. But he also warned that this game of chance should not be allowed to continue for too long, and explained Italy’s resistance level.

For its part, La Repubblica notes that Germany appears “slightly more open,” but argues that even if Monti has succeeded in obtaining a relaxation of the budgetary controls envisaged within the framework of the treaty on reinforced economic union, which is up for discussion at the end of January -

... there has hardly been any progress on European measures to reassure the markets. Chancellor Merkel’s praise for the initiatives undertaken by Monti’s government […] is a testament to the extent of European fear inspired by the spectre of Italian economic collapse and of the profound relief prompted by the resumption of responsible government. But it will not be sufficient to save either this country, or, in all likelihood, the euro.

Finally, Il Sole 24 Ore argues that the problem in Europe “is no longer Italy” but Germany. At a time when Europe and Germany are menaced by recession, and recovery is dependent on a European initiative-

… all Merkel has to offer Monti’s Italy is words: words that are certainly new, but still only words. […] At a time when the fate of the euro hangs in the balance, we have a German Chancellor who speaks about Europe without saying anything — while doing even less — and one who attempts to directly control her partners’ budgetary policies without offering anything in exchange. This is serious cause for concern: notably because the game has been allowed to continue for too long, and, as the markets have shown, it simply does not work. We have reached a point where it is time to stop blaming the irresponsible behaviour of Mediterranean countries, which are paying a high social cost for the painful effort to get back into step. If the goal is to save the euro and not to sink it, we should instead be speaking about German irresponsibility.

In Germany, Frankfurter Allgemeine Zeitung welcomes the Chancellor’s praise for the reforms undertaken by Monti’s government, while recommending that the Italian government leader pluck up the courage to tax the enormous private fortunes in his country. The conservative daily is also rankled by Monti’s bid to enable his country to borrow at a lower rate on financial markets:

EU partners have always been more than patient with Italy’s tendency to stray from a tolerable level of indebtedness. The Italians failed to take advantabge of the greatest gift of the euro — unusually low interest rates — to restore their public finances. [...] The EU has no obligation to offer lower interest rates to Italy, but rather Rome has an obligation to its partners, and that is to reduce its debt.

Berlin’s insistence on more austerity has prompted increasing opposition in Europe, remarks Der Spiegel Online, which notes that this has now resulted in a change in the of the balance of power in the EU. Headling with “Two against Merkel,” the news website notes that Nicolas Sarkozy and Mario Monti are now acting as “duo” in their bid to counter Angela Merkel :

On occasion, hopes can turn into uncomfortable disappointments. [...] Monti no longer wants to cut costs. He wants another policy, which is completely different to the one advocated by Angela Merkel. [...] And his demands are the same as those that have been tabled by Paris for quite some time. [...] Until now, Merkel has more often than not succeeded in obstructing the French. However, Paris will now benefit from support from Italy, which is the Eurozone’s third largest economy. At the end of last week, Monti visited the French President to agree on the way ahead. Rumour has it that the atmosphere at the meeting was more than harmonious.

Faced with this challenge, the most crucial for our country since the overthrow of the dictatorship of the colonels in 1974, we must choose between taking all the measures necessary to stay in the eurozone or sinking into uncontrolled bankruptcy and thus return de facto to the drachma.

The paper attacks the political parties that encourage instability. PASOK (socialist), LAOS (extreme right) and New Democracy (right-wing) "support the government [and] at the same time lead the political opposition."

To Ethnos notes that -

... the dilemma over the euro or the drachma leaves no one indifferent, even the left parties that have a different view on the issue. The truth is that this dilemma hides a major truth. The measures, the bailout plans imposed by the EU and the Greek government in the name of the euro these last two years, as well as all those that were implemented for the good of the country have drawn us closer to the drachma.

But the daily warns that while "a majority of Greeks do not want the drachma, many no longer feel implicated in the debate".

Yet, as highlighted by news site protagon.gr-

... a return to the drachma would impoverish 90% of the population. We must thus realise that, like it or not, we must do everything to stay in the euro clan in order not to become the poor little neighbour of 'Grand Turkey'. This requires much, much work with major sacrifices but the choice is ours to make.