In recent days, senior European leaders have insisted that the worst of the crisis is now over. But this is nothing new. Here’s a brief chronology of statements to this effect:
- 10/12/2009 – Brian Lenihan, Irish Minister of Finance: “Our plan is working. We have turned the corner.”
- 09/07/2010 – Jürgen Stark, ECB Chief Economist: “[T]he worst is over…The I.M.F. is underestimating the strength of the economy in Europe.”
- 29/01/2011 – Christine Lagarde, French Minister of Finance: “I think the euro zone has turned the corner.”
- 10/03/2012 – Herman von Rompuy, European Council President: “[P]roblems have not yet finished, but the worst of the crisis is over.”
- 13/03/2012 – Wolfgang Schauble, German Minister of Finance: “We can say that the worst is behind us, but we cannot relax our efforts.”
- 13/03/2012 – Mario Monti, Prime Minister of Italy: “The most acute phase of the crisis appears to be definitely over but this is no reason for us to relax.”
- 13/03/2012 – Francois Baroin, French Minister of Finance: “If the question is whether the worst of the crisis is behind us, one can say yes … If we do not deviate from our path, the worst is behind us.”
- 22/03/2012 – Mario Draghi, President of the ECB: “The worst is over, but there are still risks. The situation is stabilising.”
- 27/03/2012 – Nicolas Sarkozy, President of France: “I think we came out of the financial crisis, that confidence is restored and we are in the process of economic recovery…Europe has an economic government which overcame the Greek crisis.”
- 27/03/2012 – Olli Rehn, European Commissioner for Economic and Monetary Affairs and the Euro, “The crisis in Greece is a challenge for the Greek society and for the EU. It is the legacy of years of irresponsible policies. Thanks to European solidarity, we avoided the worst, a social disaster.”
- 28/03/2012 – Herman von Rompuy, European Council President: “[W]e have turned a corner.”
- 28/03/2012 – Mario Monti, Prime Minister of Italy: “You all know that the eurozone has gone through a crisis, a huge crisis. I believe this crisis is now almost over.”
- 18/10/2012 – François Hollande, President of France: “The worst is over.”
- 19/11/2012 – Mariano Rajoy, President of Spain: “There are doubts about the irreversibility of the euro, it’s true that there were more a few months ago than today…I’m totally and absolutely convinced that the worst has passed.”
- 27/12/2012 – Wolfgang Schauble, German Minister of Finance: “I believe the worst is past.”
- 07/01/2013 – José Manuel Barroso, President of the European Commission, “I think we can say that the existential threat against the euro has essentially been overcome.”
- 09/01/2013 – Herman von Rompuy, European Council President: “Firstly and most importantly, the worst is behind us, in particular the existential threat to the euro.”
- 10/01/2013: Herman von Rompuy, European Council President: “The worst is now behind us, but not all is right, far from it.”
- 11/01/2013: Wolfgang Schauble, German Minister of Finance: The single currency is “over the worst of the crisis”
- 14/01/2013: Jean-Claude Juncker, President of the Eurogroup, “[T]he worst is probably over, but what we still have to do is difficult.”
- 16/01/2013: Ewald Nowotny, Member of the ECB Governing Council: “The crisis is not over yet, but the worst is over.”
So is the euro crisis over? That depends on our answer to the question, “what is the euro crisis?”
Is it a financial crisis, where the worry is that financial sector will collapse?
Is it a crisis of sovereign debt, where the worry is that creditors will not be paid?
Is it a crisis of convertibility risk, where the worry is that the euro will splinter?
In part, it’s all of the above. The most recent bout of triumphalism has been triggered by a newfound confidence that the euro will not break apart.
But this is misplaced. The euro is a means to an end (be it price stability, an end to competitive devaluations, cheaper rates of finance, a tool of administrative simplification, an end to currency risk, or a presumed step on the road to ever closer union in Europe) but not an end in and of itself.
On the question of output, the eurozone’s performance remains dismal, as Ryan Avent has pointed out. Like the overconfident Prince Prospero in Poe’s Masque of the Red Death, Germany is now discovering that there is no escaping the plague that devastates the continent; its economy is now contracting.
The euro crisis is a jobs crisis. Mass unemployment remains the main problem to be solved. So long as this issue remains unaddressed, the erosion of confidence in political institutions will continue unabated, especially on the periphery.
In the words of Angela Merkel: “The crisis is far from over.”