Yes, because the new European Fiscal Compact is fundamental if Germany and other northern European countries are willing to strengthen protection and rescue mechanisms for the eurozone. And no, because the treaty establishes rules that are almost impossible to fulfill on a regular basis, even by the states now imposing them.

The Expresso editorial adds that –

... this will at best serve to ensure the commitment and solidarity of the strongest countries to the countries rescued or at risk. (...) And will show that the eurozone can move on without leaving countries behind. And to enforce budgetary discipline on countries that have almost always ignored it.

In an opinion article published in the same weekly, sociologist Pedro Adão e Silva warns that the consequences of this treaty are evident –

If the Treaty is to be taken seriously, the least developed member states will be deprived of the economic policy mechanisms that make recovery possible, while continuing to lack the desirable financial instruments, characteristic of the federal system. In the end, we alienate sovereignty, without any compensation.

… a crucial instrument to guarantee a fair contribution from the financial sector to the cost of the financial crisis.

The initiative is not unprecedented. The European Commission already proposed a duty on transactions involving shares, derivatives and other financial products last September, which met with immediate opposition from the United Kingdom and Sweden. This time around, the ministers point out that they are willing to seek “alternatives” if a solution has not been planned within the next six months – a remark, which SZ believes is evidence of an important development "if you read between the lines” –

The nine signatories send a very clear message: we can go it alone. [According to the provisions of EU treaties] states can enter into agreement for reinforced cooperation if they come together in a group of no less than nine. That is why this short letter reads almost like a heavy-handed threat to colleagues who have yet to make up their minds. All those concerned have been warned: the overwhelming likelihood is that the tax will be introduced.

Finally the daily notes that the letter will also have an internal impact on signatory countries, notably France and Germany: it will enable Nicolas Sarkozy to aspire to more votes in presidential elections in April and May, and give Angela Merkel something to offer the Geman opposition, which made the introduction of a Tobin tax a condition for its endorsement of the fiscal compact.

Economists speaking to the Lisbon daily believe that unemployment, currently at 14%, will continue to rise, and "with a growing recession, a new bailout will be inevitable. It’s just a matter of time,” said one. Another gloomily adds that forecasts are -

... confirmation that austerity measures are not working, that they are destructive and that recession will be inevitable and long. [...] A bailout programme wrapped in recession creates itself the impossibility of a solution. I fear that the need for outside help will become a cumulative and recurrent problem.

The Brussels forecast comes as experts from the ECB/EU/IMF are in Portugal studying its compliance with the €78 billion bailout package of May 2011. In an angry editorial, Público warns that –

In the absence of a different European approach to the Portuguese problem (and the Spanish, Italian, or Greek one), this sharp fall in gross domestic product is a sentence without appeal. And as we can see no significant change in the priorities of the Merkozy axis towards the debt crisis, the country must be prepared to gnash its teeth even more, to watch ever faster destruction of jobs and further deep degradation of the economy. (...) As Brussels revealed yesterday, the troika`s solution threatens to lead the country to the abyss even before the reforms take place.

The Portuguese, DN writes, came out to protest against unemployment [currently at 13.6% and rising], freezing of the minimum wage, changes to unemployment benefit, cuts to holiday pay and Christmas bonuses for civil servants and pensioners, as well as VAT hikes on essential goods. In its editorial, the Lisbon daily notes that -

... the new times approaching, carried by extreme austerity, are a serious warning that the government should not ignore. […] Poverty and growing despair are not “whining” [an allusion to a remark made by the PM that the Portuguese should not be “namby-pambies”]. It is a warning that urgent action is needed. According to the CGTP, 300,000 were on the streets of Lisbon yesterday. Without disorder or any signs of violence. […] But nothing, really nothing, guarantees that it will always be like this. For this reason, the Greek example should not, must not, be ignored.

What attracts Portuguese businesses to the Netherlands, the Lisbon daily writes, is lower taxes, easier access to credit and a reputation for stability that Portugal does not enjoy. Another daily, Diário de Notícias, adds that of the 20 companies listed on the Portuguese stock market's blue chip PSI-20 index, 17 are already settled in the Netherlands.

In a leader article, Jornal de Negócios notes that-

... what is hard to swallow is not that [JM CEO] Soares Dos Santos has broken with his past in Portugal – he hasn't and continues to pay taxes here. It's that he has broken with its future. Since the conditions for growth no longer exist here, he has decided to invest elsewhere, to seek profits and create jobs outside of Portugal. [...] But investing abroad is not a betrayal. It is just an abdication of responsibility.

With one million Britons living in Spain and some 50,000 UK resident in Portugal –

The Foreign Office is concerned that expats who have invested savings in their adopted countries could be left stranded, unable to withdraw cash and facing losing their homes if the banks call in loans.

Foreign Office sources said it was planning for a “nightmare scenario” with thousands of penniless Britons sleeping at airports with no money and no means of getting home.

Among the plans being discussed are the sending of planes, ships and coaches to the region, as well as extending small loans to those stranded. Although Spain and Portugal have a bank deposit guarantee scheme where clients are covered for up to €100,000, “banks limit withdrawals to stop people removing all their money and leaving the country.”

According to a Foreign Office source, the plans are-

… drawing on experiences of other mass evacuations, such as during the 2006 war between Hezbollah and Israel where the UK sent warships to evacuate expats from Lebanon.

“It sounds like a scare-story, but it must be taken seriously,” writes El Mundo, on a scenario that “has sounded the alarm throughout our country’s British community, in Marbella and Malaga especially”.

Noting that the revelations coincide with the downgrading of ten Spanish banks by rating agency Standard & Poor’s, the Madrid daily writes that the majority of British expats in Spain are retirees who have sunk their savings in coastal residences which “took an enormous hit when the housing bubble burst.”

Workers fear for the future and are therefore more willing to rebel  and protest, union sources have told Público. Among the austerity measures, the most hotly contested are "cutting overtime pay and increasing the flexibility of working hours, cuts to public sector pay [...] massive layoffs in the transport sector and reduction of unemployment benefit in times of recession".

According to Público, the general feeling is that the government must be more open to negotiation. Otherwise, "if you do not enter into social dialogue seriously, attitudes tend to harden," says a union leader, while another adds: "And we will not stop!"

Or perhaps there is. There’s the European Commission, guardian of the treaties and of the “economic government” of the EU, as its President, Jose Manuel Barroso, recently repeated. But when it comes to the eurozone, it’s the Eurogroup – the Ministers of Economy, i.e. national governments – that has taken over. Again, therefore, Paris and Berlin.

The recent appointment of European Council President Herman Van Rompuy as “Mr. Euro”, with the blessing of Angela Merkel and Nicolas Sarkozy, strengthens the role of member states in the economic governance of “Euroland”, with Germany and France in the lead.

The catch is that this set-up isn’t based on any agreement and that the decisions taken by “Merkozy” seem increasingly to be evading any debate, even within the eurozone itself. Indeed, no other country is able to influence the discussions or to act as counterweight to a steamroller increasingly unencumbered by courtesies when addressing one’s peers, as shown by the angry and hostile tone in which the proposed referendum in Greece was greeted by “Merkozy”.

Among the other “big” countries, Italy, the third-largest economy in the eurozone, finds itself in the hot seat because of the precariousness of its government and its public finances. Meanwhile Spain, in the middle of an election campaign, is not out of the rut yet. 

Hammered by the debt crisis, they are, like Portugal and Ireland, well distant from the “triple A” of the rating agencies that seems to confer supernatural powers on countries that still have it. Which, incidentally, explains why the French president is obsessed with keeping his country in the most prized circle of the moment. In the eurozone, the other members of this triple-A club – Austria, Finland, Luxembourg and the Netherlands – either pack a light punch or are aligned with the Franco-German duo.

While Merkel and Sarkozy may be able to avoid the most threatening whirlpools, however, they seem to have no clear idea of where they want to steer the good ship Euro – and they have no mandate for it either. This lack of clarity and legitimacy weighs heavily over the uncharted course of the crisis and gives the impression that they’re navigating by sight. Steering through the storm, we’re not willing to hand the helm over unless those who take it can guide the ship and crew safely to harbour.

Translated from the French by Anton Baer

“The country has witnessed one of the most important and dramatic messages of recent years,” Público confirms in an editorial. “The prime minister has confirmed to the Portuguese that the battle they have waged has gone well beyond merely outracing a financial crisis. The issue now is the collapse of the country.”

According to Silva, the solution to the euro crisis should first and foremost be provided by "greater European economic governance," and a reinforcement of  community method that would highlight the “pivotal role” played by the European Commission. This was “the speech that Europe needed,” announces an exultant Público. The newspaper argues that Cavaco knows “that fragile peripheral states like Portugal have everything to gain from a reinforcement of community institutions, and everything to lose if they are sidelined. This is probably the reason for his warning against the risk that power will be end up in the hands of member states – especially, the more powerful ones.”

The vote was closely followed in Portugal, both because the popular and populist Jardim is a controversial figure, and because Madeira’s financial situation is viewed as a cause for concern. Over the last few months, a debt of 6 billion euros, which Jardim had kept secret from the public until last summer, has added to pressure on Portugal. As the weekly Visão recently remarked, “Today, Madeira is for Portugal what Greece is for Europe.” However, “it remains to be seen if Portugal will adopt deal with Madeira, in the same way that Finland dealt with Greece": by imposing conditions in return for aid.

In Lisbon, Público also notes that “the euro zone reduced the interest rate charged to Portugal and does away with the initial ‘penalty’". Portugal, the third country to get a bail-out, will benefit from the same rate of 3.5 percent and a repayment period extended to 15 years for the loan of 78 billion euros agreed in May.

The wider situation has been grasped: Greece is nearing bankruptcy, despite belt-tightening and the money from the EU and the IMF; the Portuguese and Irish sovereign debts have been downgraded to “junk" by the rating agencies; and Italy is being forced, practically with a knife to her throat, to adopt a plan to cut 40 billion euros in spending. In response, the 17 states of the eurozone, as well as the European Central Bank and the Commission, are arguing over the strategy to adopt. “Owing to a lack of political leadership, squabbles over the conditions for the banking sector’s participation in the new aid package to Greece are leading nowhere. However, dear ministers, this is like nursing a cold when it’s cancer that’s the threat," lamented Le Monde after the last unsuccessful meeting of finance ministers.

Our leaders are, however working under mitigating circumstances – but those circumstances give even more reason for concern. The first, as Die Zeit explains, is that they must choose between, on one hand, domestic political pressure not to finance clearly useless bailouts that burden the people without troubling the banks – and, on the other, a financial sector that imposes its own rhythm, undermines states, and yet retains a strong argument: that its money is indispensable for financing state debts.

The second comes from across the Atlantic. On July 14 Standard & Poor's threatened to downgrade the credit rating of the United States. In Washington, Obama has so far failed to end the budget standoff with the Republicans. The financial crisis shaking Europe is thus threatening to undermine America, which would just worsen the situation on our continent further. US officials, however, don’t seem any more up to the task than the Europeans.

Whether indecisive, incompetent or simply paralysed by this challenge and the feeling of no longer being in control of the destiny of their countries, EU leaders must show determination. But it would take a very clever leader to show us the right way forward.

“The government and [Portuguese President Anibal] Cavaco [Silva] are united. Against the rating agencies: a struggle without respite,” headlines the Portuguese daily i. The Lisbon daily notes the rapidity with which the government and the president, along with the politicians, bankers and businesspeople unanimously condemned the country’s downgrade by the Moody’s rating agency.

Público – Spain

“Europe (finally) in revolt against rating agencies,” headlines Spanish daily Público.”It’s time to end the oligarchy exercised by the three North American rating agencies around which there exists a network of interests that raise legitimate doubts about the objectivity of their dictates,” the paper says. A “generalised reaction of indignation,” says the paper’s leader, which explains that “the president of the European Commission, the German finance minister, the European Parliament and Spanish and Portuguese business leaders are leading a charge of unparalleled force against rating agencies and are calling for the creation of a European rating institution. But “creating alternative agencies is not enough, albeit European and honest ones, if no progress is made on European political union and if no far-reaching thought is given to the most adequate economic model,” the paper concludes.

Gazeta Wyborcza - Poland

“Moody’s sows seeds of terror,” runs the headline in Gazeta Wyborcza, which fears that “Portugal will not be able to reduce its budget deficit” and that the country will need, just like Greece, “a new financial infusion" from the International Monetary Fund and the European Union. The Polish daily quotes an expert who says that the rating agencies impede bailout operations in the eurozone by lowering the ratings of indebted countries “at the worse time for the markets”. It is thus urgent to put in place an international ratings agency under the influence of the EU. Otherwise, the paper concludes, “we will be forced to continue to believe institutions that warned us often about the crisis and that, once it arrived, only made things worse”.