The breathtaking events unfolding in France expose all the old deformities of the half-finished euro project. They revive the poisonous internal politics that have long bedeviled monetary union, pitting Teutonic creditors against Latin debtors with conflicting morality tales.
The ECB’s untested Transmission Protection Instrument (TPI) allows the governing council to buy distressed bonds on its own authority, but only for countries that pursue (a) “sound fiscal and macroeconomic policies”; (b) are not “subject to an excessive deficit procedure”; (c) do not have “severe macroeconomic imbalances”; (d) where the “trajectory of public debt is sustainable”; and (e) where stress is “not warranted by country-specific fundamentals”.
France fails on most counts, and is on course to fail on every single one under any of the scenarios likely to emerge on July 7, including the pre-insurrectional chaos of a state with no functioning government at all.
Macron has killed fiscal union stone dead, and without fiscal union the euro cannot work over the long run. It will lurch from crisis to crisis until Germany finally loses patiencehttps://t.co/PgRl8XRzb0
— Ambrose Evans-Pritchard (@EvansAmbro84839) June 25, 2024