Euro, fairy tale with a happy end?

Will Europe truly come to the rescue of Greece? Germany and France have different views on the role Europe should play, making a clear reply difficult. This difference will continue to dominate every discussion in European financial policy a Charlemagne article in The Economist explains.

The euro was not blessed by political and monetary unity at birth (as was the case with the US dollar). This curse of the bad fairy has come to haunt the blessed princess. The euro pricked her finger on a spindle called Greece, but how the sleeping beauty will come back to life and happiness remains uncertain. 

Optimists say France and Germany will play their part as 'good fairies'; pessimists think the euro-curse will hold and the currency will break up. The article says both camps have a "too tidy" narrative. The key to the problem is in the concept of monetary unity. Germany wanted a "European Bundesbank", an independent watchdog to fight inflation, while France wanted a central euro-bank that would be “counterbalanced” by elected politicians, who could tell them when to put growth and jobs ahead of price stability or fussing about deficits. One goal was common to all:  end exchange-rate risks within the internal market, including competitive devaluations. 

France and Germany still disagree on the next step in rescuing Greece. Fiscal rigour is what German politicians advocate, while their French colleagues hope for more intervention. Jean-Pisani Ferry, director of the Bruegel think-tank says It is a fantasy a fiscal union will slosh out money in the euro-zone  to iron out the varying economic development.  

A story to be continued…  and no doubt followed by a series of other similar tales of the unexpected, in the rescue of Spain, Portugal etc. Not to mention thrillers like the rescue of the automotive industry (or not) and other economical pillars of the European industry.