At the extraordinary informal summit of 23 May, EU leaders agreed that the issue is no longer taboo and that each was studying the issue for themselves. At the same time they repeated their wish that Greece should remain in the eurozone – provided, of course, that it honour the commitments to its creditors. And there lies the central rub of the question: more than it is a question of economics, the “Grexit” is pre-eminently a political issue – just as was Greece’s joining the eurozone at a time when officials in Brussels and elsewhere knew very well that, like the Italians before them, the Greeks were not ready.

It is up to Europe’s leaders to decide whether or not they are willing to assume the economic costs to their banks and their taxpayers of a Greece exit from the eurozone – and the political costs too: loss of credibility of the single currency, the breakdown of the European integration model, and the flight of the "Cradle of Democracy", to name just a few. Their Greek counterparts, on the other hand, must decide how far they are willing to respect their commitments or, if they want to go back on them, how they intend to do so.

As for their exit from the eurozone, it seems not to be an option either for them or for most of their constituents. And it is precisely because the political and economic costs of a “Grexit” would be too high for both the Greeks and their partners that it is reasonable to bet on a “softer” outcome, which ought to be emerge following the June 17 parliamentary elections in Greece and France. 

Europeans will probably end up accepting a new restructuring and debt rescheduling for Greece, which will give a breather to a population tested by two years of severe austerity. Likely to be governed by an unprecedented majority and monitored closely by the EU-ECB-IMF “troika”, the Greeks will be forced to reform a state that has proved unjust and inefficient and to stop exploiting the crisis, the consequences of which are plain to all.

… fell to 116 dinars against the euro, forcing the the country’s central bank to intervene and spend €80 million of its reserves.

The domestic context in Serbia following a presidential election on 20 May has contributed to this steep decline in market confidence –

Investors moved en masse to offload the currency, [...] in the wake of the failure of the Tadic coalition government, which had come to embody the country’s aspiration to enter the European Union, and the surprise victory of right-wing leader Tomislav Nikolic, who is now experiencing difficulties in forming a government.

Belgrade is also largely dependent on “foreign banks based in EU countries, many of which are Greek and Italian.” This is one of the main reasons for concern over the prospect “of another credit squeeze in the region,” notes the French daily.

For the influential business weekly, the choice is simple, either a break-up of the euro, or a move towards closer European integration – even if only ”technocratic and limited”:

 

For two crisis-plagued years Europe’s leaders have run away from this choice. They say that they want to keep the euro intact – except, perhaps, for Greece. But northern European creditors, led by Germany, will not pay out enough to assure the euro’s survival, and southern European debtors increasingly resent foreigners telling them how to run their lives.

But if the EU’s leaders were to choose a euro break-up –

… banks and firms across the continent would topple because their domestic and foreign assets and liabilities would no longer match. A cascade of defaults and lawsuits would follow. Governments that run deficits would be forced to cut spending brutally or print cash.

This is one of the reasons for which, the august journal “reluctantly” concludes that “the nations in the euro zone must share their burdens.”

Saving the euro is desirable and it is doable. One question remains: will Germans, Austrians and the Dutch feel enough solidarity with Italians, Spaniards, Portuguese and Irish to pay up? We believe that to do so is in their own interests. The time has come for Europe’s leaders, and Mrs Merkel in particular, to make that case.

... over 80 percent of Roma respondents live in households at risk of poverty, less than a third bring home a salary, and only 15 percent have been to high school, against 70 percent for the rest of the population.

The study concludes that Roma are “not sufficiently aware of the rights guaranteed under the legislation of the European Union”. Thus, only 40 percent of Roma know the laws that prohibit discrimination against ethnic minorities looking for work.

The Commission plans to impose a tax on financial transactions throughout the EU, at a rate of 0.1 percent on stocks and bonds and 0.01 percent on other financial products. [This] “could generate up to 57 billion euros, if applied across the EU.

Which is not a sure thing, the paper notes –

Nine countries, including Germany and France, are defending bringing in the tax, but others, like Britain, are opposed because they fear it will provoke financial activities to relocate.

Britain’s Prime Minister has also erupted in “fury” at the summit, writes the Telegraph, quoting David Cameron –

The Financial Transactions Tax is a bad idea. It will put up... the cost of people's pensions, it will cost many, many jobs. It will make Europe less competitive and I will fight it all the way.

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!

The affair, which has already been reported by EUobserver, concerns the British firm G4S-UK, which, contrary to expectations, won a 10 million euro contract with the European External action Service to protect EU staff and premises in Libya. Rue89 remarks that the deal raised eyebrows because, unlike its competitors in the call for tenders, the Hungarian firm Argus and the British Canadian Garda World, G4S-UK “had no track record of protecting European delegations”.

The French news website argues that the affair highlights a problem of conflict of interest in the EEAS, which is managed by Britain’s Catherine Ashton –

Some [...] suspect Great Britain of misusing its influence in the EEAS to favour the main private military companies in the UK.

‘In 2010 and 2011 half of China’s imports from the European Union came from Germany, which is up from 39 percent in 2000.’ This reinforcement of Germany’s significance as a major trading partner of China has also helped bring European business to China. The fact that Europe has not lost market share in China in the last ten years – unlike Japan and the United States – is largely thanks to Germany. Moreover, Germany is one of those few European countries to enjoy a trade surplus with China. Buoyed by the strength of trade relations built up between Beijing and Berlin, the EU therefore has no choice but to weigh up this new economic partner.

That privileged relationship, however, risks harming the relationship between China and the EU, as it is primarily a bilateral one. “The Chinese want a recovery in Europe to be led by the Germans,” writes Le Temps of Geneva. Looking at the conclusion of the study, the Geneva daily warns -

The only possible balance must be through the EU. To convince the Germans to remain good Europeans in this area, however, a strategic partnership between the EU and China must be developed, and with some urgency.

Today, in the aftermath of elections that have demonstrated the strength of those opposed to austerity policies demanded by the EU and the IMF and the steep decline in support for the major traditional parties in the country, a Grexit is more than just a rhetorical threat, but a real hypothesis – and one which could definitively materialise in the re-run of elections scheduled for 17 June.

But should we be convinced that a Grexit is the solution? The economists and politicians who have weighed the pros and cons of such a move have failed to provide a convincing case for a Eurozone either with or without Greece. Rather, as Il Sole-24 Ore has noted, the current debate resembles a bluff – and a particularly dangerous bluff for all involved.

Europeans are faced with an impossible choice. A decision to expel Greece from the Eurozone, in a procedure not covered by any European treaty, could result in a loss of confidence in the entire European economic system and undermine the credibility of the EU both as a political project and as world power. At the same time, a drive to maintain the status quo will not only perpetuate policies that are destroying Greece’s social fabric and weaken the cause of democracy in a country that was –  as we never tire of saying –  its birthplace, but it will also expose Europe to the risk of spending billions of euros for nothing, because the Greek state is now to all intents and purposes a fiction.

In response to a dilemma which has emerged over the fate of a country that accounts for less than 3% of its GDP, Europe has been unable to provide an effective solution. Instead it has been caught in a deadlock arising from its own equivocal status: it is too integrated, both economically and politically, not to be endangered by the Greek crisis, but not sufficiently integrated to provide itself with the means it needs to overcome such an obstacle. Without the single currency and without the single market, it would have been easier to allow the Greeks to default and devalue their currency. At the same time, with the mechanisms for increased coordination of budgetary policies and measures that allow for the imposition of reforms in Greece, particularly with regard to the collection of taxes and the fight against corruption, Europe may be able to push the country towards recovery.

But how can we say to the people of Europe that the solution to the current crisis is more Europe? EU leaders are now paying the bill for more than two decades (from the 1986 Single European Act to the 2009 Lisbon Treaty) of accelerated progress on a road to European integration paved with promises of prosperity which has consistently avoided the issue of democracy in the Union.

Now that the wear and tear on Europe’s institutions has been compounded by the debt crisis, the European project has been caught like a Minotaur lost in a labyrinth, where it is vainly seeking a way out. Or should we say… a “Grexit”?

Having said that, France’s European partners should not “conclude that François Hollande’s foreign policy will be tainted by anti-European sentiment. This would be a mistake”, argues Le Monde, which nonetheless draws attention to what it describes as “an unavoidable political reality” –

… the French do not trust Europe. But more often than not, their Eurosceptic mood and occasional support for a policy of national withdrawal is fueled by a conviction that European integration will pave the way for all of the ills of economic liberalism. Of course, Europe is a market: this is one of its strengths, the secret of its appeal, and the driving force behind its competitiveness. But it should also be a political and civilisational project. M. Fabius is not the worst choice of politician to speak on behalf of such a Europe”.

In any case, remarks Libération, which points out that Fabius and Cazeneuve are “not the only Eurosceptics in the French cabinet” –  

François Hollande has appointed them to posts where, they will have little real influence on European affairs – ‘a field reserved’ for head of state, which will be effectively managed by the Elysée.

The unknowns concern the willingness of the new president to cut spending ... and also François Hollande's ability to change his position on Eurobonds and alter the role of the ECB.

However, Anne-Marie Le Gloannec, says "some compromises seem possible: the treaty [the fiscal pact] will not be renegotiated but rather, they will agree a pact on structural growth, both for Europe and for France, which François Hollande has already broadly sketched."

The two leaders will "become closer", adds La Croix, saying -

Principles first: in a united Europe, nothing is possible if France and Germany disagree. Pragmatism, too... The political crisis in Greece means that we cannot afford to get lost in quarrels over principle. A little realism is required about the inner workings of each country.

From the German perspective, Süddeutschte Zeitung asks  -

Is this the end of the Franco-German partnership? Not at all! Hollande will be moderate, Merkel will move. ... François Hollande does not have the vision of Napoleon or Mitterrand.

In another comment piece, the daily adds that François Hollande is -

a new chance for Merkel. [They] will be remembered as the people who ensured the survival of the euro or who masterminded its demise. They are forced to succeed from their first meeting. This pressure should give hope to all of Europe.

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."

Without taking a position on the guilt or innocence of the one-time muse of the 2004 Orange Revolution, who in October was sentenced to seven years in prison for abuse of office, supporters of the boycott want to protest against her mistreatment in prison and the repression of the opposition in the Ukraine.

Tymoshenko’s case is emblematic of the increasingly authoritarian tactics adopted by Viktor Yanukovych’s regime and the resulting damage to relations with the EU: since his election in 2010, the leader of the Party of Regions has worked steadily to bridle the opposition and increase the hold over his supporters – the Russophone community in the East of the country – over the country. At the same time he has blown hot and cold with the Ukraine’s two main neighbours, Russia and the European Union.

The former, which has the benefit of close cultural ties with Ukraine, is hoping to maintain a grip on the country that would transform it into a kind of southern Belarus, in a relationship dictated on its terms. The latter is counting on an association agreement that is now ready for signature, and the offer of a free-trade agreement, which amounts to watered down membership of the EU, to develop the bond between Ukraine and its western historic and cultural environment. Along with what is now Poland, Lithuania, and Belarus, western Ukraine formed part of the Polish Lithuanian Commonwealth in the 16th-18th centuries, and it is hoped that the soft power which the Union is supposed to exercise over its entourage will build on this history.

The opponents of a boycott fear that such an initiative will force Kiev into the arms of Moscow. There is a risk that Ukraine may respond in this manner, but it would be acting against its own economic interests and at the same time undermining its proudly won independence. That said, most Ukrainians believe that sooner or later the future of their country will be in the EU, and Brussels must be careful not to betray this expectation.

For this reason, a boycott that results in politicians rather than teams staying away from fixtures may be the best policy, and it is one that would be made more effective if it is associated with pressure exerted by economic measures (the application of anti-money laundering legislation with regard to Ukrainian capital in the EU) and border management policies (the withholding of visas for figures in the regime responsible for abuses, but easily obtainable visas for students, researchers, businessmen and tourists), coupled with a communications campaign to explain the reasons for this response to the people of Ukraine. Finally, the EU and the OECD should flood the country with observers for next October’s general elections so as to ensure that the vote is conducted in the best possible manner.

The main reason for this vote, European Voice says, is the announcement on May 9, of the departure of the president of the EFSA, Diana Bánáti, who stepped down to-

rejoin the board of the International Life Sciences Institute Europe (ILSI), a research and advocacy group. MEPs had asked the European Court of Auditors to investigate alleged conflicts of interest at EFSA, including Bánáti's links to the food industry.

Parliament's decision was welcomed by Monica Macovei (European People’s Party), a Parliamentary rapporteur for financial practice in 2010, who is often praised for her role in the fight against corruption. "Transparency and proper management of conflicts of interest have become vital for governance and for citizens. They must become an important criterion in budgetary expenditure procedure for all EU institutions,” she told the Bucharest-based daily România liberă.

European Voice adds, "The three agencies have until September to provide fuller explanations of their spending in 2010, with the Parliament voting later in the autumn on whether to approve or reject their accounts.”

At a time when "pensions and labour laws are violated and while demonstrations and riots spread from one member country to another" the only contribution that the manifesto proposes to rebuild the Union from the bottom up consists of "having the right to a sabbatical year of voluntary work in another EU country" quips the newspaper, which then asks:

Is the only response from these friends of Europe, when the Union is shuddering like the Titanic, that we must spend a little more time together so that we feel European?

And the newspaper concludes in the same tone: "It's probably no coincidence that this initiative is supported by the Allianz Group [a German insurance company] – one of Greece's main creditors."

After a worrying time about this 'renegotiation' European officials are saying today that they are now willing to help the French president complete the treaty of fiscal discipline through a growth initiative. Indeed, the 'claims' made by François Hollande reassured Brussels, because the projects already underway continue.

Les Echos adds that the President of the European Commission, Jose Manuel Barroso, said that he is happy to benefit from the opportunity created by the arrival of François Hollande to encourage a boosting of investment, provided it does not go back on the necessary deleveraging.” However, the paper warns:

This sudden urge to increase growth projects, however, risks clashing with the reality of public finances. For the EIB to recapitalise, 10 billion euros must be found, while in order to reallocate unspent structural funds, the states would have to transfer to Brussels the 82 billion they promised but have yet to hand over due to delays. And that is without including the 80 billion euro bill for building up capital for the future European Stability Mechanism (SPM). (...) Without cash in the coffers, the growth debate is about toeing a fine line between budgetary discipline and plunging into recession.

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.

Paraphrasing the words of John F. Kennedy, the signatories call –

on the European Commission and national governments, together with the European Parliament and national parliaments, to create a Europe "of actively employed citizens", and to create the financial and legal conditions for the establishment of a "Year of European voluntary service for everyone", as a counter-model to the “top-down” approach currently prevailing in Europe – a Europe of elites and technocrats. The goal is to democratise national democracies and to rebuild Europe behind the rallying cry: "Ask not ask what Europe can do for you, but what you can do for Europe – Make Europe!"

Wishing for "ordinary European citizens to come together to be their own bosses”, the authors of the document describe it as “an organic, naturally-occurring act” through which Europe will develop a new constitution “from the bottom up”.

The directive drastically tightens the definition of a bank’s capital reserves and hugely increases the level they are required to have, so that each institution has a cushion of funds to absorb violent economic shocks. According to the European Banking Authority, the hundred largest European banks would need to find some 485 billion euros of capital in order to comply with Basel 3.

The bill provides that each bank keeps 7% of its equity capital in reserve. The UK wants to increase this requirement to solidify its deposit banks. France, however, wants the funds involved in insurance subsidiaries to be excluded. Le Figaro says:

The debates will likely be very heated and may lead to adoption of the text being postponed until May 15. However, failure seems forbidden, as Europe needs to prove today that it is moving forward on the path to strengthen its banking system.

Last week, Le Monde reported that the European Commissioner for Internal Market, Michel Barnier, wants to ask banks how they have used the 1,000 billion euros, which were injected by the European Central Bank to avoid the credit crunch.

On 25 April, the President of the European Central Bank, Mario Draghi’s allusion to a “growth compact” met with support from the German Chancellor. But the fact that two major proponents of debt reduction and budgetary discipline are employing the same terms as those used by the French presidential candidate does not mean that they agree with his programme; rather that the lines are being drawn by two camps preparing for a battle that will be fought over the next few months.

On one side, François Hollande is advocating infrastructure projects financed by European “project bonds”, a greater role for the European Investment Bank, a tax on financial transactions and the utilisation of European structural funds that have not been spent. On the other, Mario Draghi is insisting that budget policies “must be subject to mutual surveillance and corrected if required”, and that “structural reforms to facilitate entrepreneurial activities, the start-up of new firms and job creation” are necessary, even if they are painful.

Supply or demand, liberal reform or Keynesian kick-start: this is not a new debate,  but it is one that had almost disappeared in the EU. Which side will prevail? If he wins on 6 May, Hollande will enter the arena with the legitimacy of an elected representative which some of the other key figures lack. Having said that, it is not certain that he will be able to turn the tables in an ensuing power struggle.

We should bear in mind that only two months ago, 12 european leaders called for stimulus measures. But the proposals outlined in their open letter – labour market reforms, opening up the internal market for services etc. – are closer to the vision favoured by Draghi and Merkel than the one espoused by the French presidential candidate. In this regard, the Chancellor’s approach to Mario Monti strongly resembles a manoeuvre to isolate Hollande, who will need support from another European heavyweight economy, even if he is counting on a win for the Labour Party in the next Dutch elections.

It appears that that the European Council will soon be characterised by a genuine left-right  alternative, which should encourage a real debate on the socio-economic orientation of the Union. After two years of crisis, it will not hurt to have a frank discussion, and even a touch of democracy.

According to Polish experts, this is yet another indication that following massive investment in Africa, America and Asia, Beijing is now seriously considering expansion in Central Europe, including Poland, which may become its main partner among the “new” EU member states. But not everyone is happy about the prospect. According to the Warsaw daily -

“... some European experts believe that Beijing is deliberately undermining the EU’s role by building bilateral relations with different European countries. This weakens the EU’s cohesion in relations with China.”

And these have recently been strained. The European Commission is “trying to force” Beijing to open the Chinese public market to European companies, threatening otherwise to introduce regulations that will allow the EU to “retaliate by closing its public market” to Chinese companies.