As Europe's economic woes deepen, Germany and France need to settle on a rescue plan.
At least August was quiet. Thanks to Mario Draghi, chief of the European Central Bank (ECB), eurozone policymakers got some badly needed R&R. His promise in July to "do whatever it takes" to protect the euro from speculation was enough to persuade traders to pack their bags and head for the Riviera.
Yet the eurozone now looks woefully behind in its mission to save the single currency. That is partly because a rescue is genuinely complicated. But it is also because too many people think that time is on their side.
Just now, sluggishness may seem like an odd accusation. The next month will contain a summer's worth of news. Last week Draghi was to put flesh on his pledge to limit the cost of medium-term borrowing by governments (and hence companies). On Wednesday, Germany's senior court will rule on whether a eurozone rescue fund is constitutional. The same day the Dutch will vote and the European Commission will unveil its thoughts on a Europe-wide banking supervisor -- a step toward a banking union.
Within weeks the troika that has just arrived in Athens will report back on whether to give Greece its next slug of rescue money. And all the while, a restless succession of meetings will continue as leaders prepare for a big summit in October.
But, measured against what needs to be done, this is inadequate. Even if the ECB successfully intervenes, the eurozone's politicians must ultimately determine the euro's fate. Although work on a banking union has begun, they are many months away from actually setting one up. Leaders increasingly recognize the dangers of excessive austerity, but they still routinely demand harsh budgets as a token of merit. The debate about mutualizing some government debt, which the Economist thinks essential to restoring confidence, has barely begun. The vague German demand to shift political power to federal Brussels has hardly been broached in France.
Some eurozone leaders think that is fine. With time, the reform under way in the eurozone's troubled economies will bear fruit. If skeptical politicians and voters have a chance to contemplate the ruinous alternative of a euro breakup, they will come round to mutualization and federation, just as they have put up with bigger transfers of money and sovereignty than ever seemed possible at the outset of the crisis two years ago. In the end, self-interest and good sense will win out.
Onward and downward
In fact, time may be working against the euro. Uncertainty and austerity are deepening Europe's economic plight. The eurozone looks to be back in recession. Unemployment is at a record high. Surveys of consumers and business activity make dismal reading -- and the malaise has spread to Germany. Prolonged economic stagnation will make it more expensive to keep the euro together -- and poison the politics of a rescue.
Any of this week's events could throw up another barrier. Germany's court ruling against the bailout fund would be the most dramatic. But the Dutch vote could further tie the hands of its politicians, and the banking-union talks could spark a row over regulation. Far from bringing countries together, the crisis is tugging them apart.
To stop the rot, France and Germany, still at the heart of Europe, need to settle on a rescue and prepare their parties and their peoples to accept it. Nothing will happen without that. It means grappling with the sort of federalism that statist France has always rejected. It means Germany accepting some debt mutualization. Nobody said this would be easy. But if Angela Merkel and François Hollande just wait for time to do their job for them, they will lose control of their fate.