Europe’s illusory deal

After Merkel’s decision to allow Eurozone funds to be used to bail out Spanish and Italian banks, the press tomorrow may declare – yet again – that some kind of breakthrough has been reached and that the Teutonic queen of austerity has been forced down from her throne. But, as ever with the Euro summits, there is less – far less – than meets the eye. Here’s my take: 

1. Growth pact. Any pact representing no more than 0.0096 per cent of Eurozone GDP is hardly going to have a discernible effect, so let’s not pretend otherwise.

2. About those no-strings bailouts. It seems countries can access bailout funds without conditions forcing more austerity, as long as they comply with the Stability and Growth Pact. But how many countries at risk of needing money from bailout funds comply with those pacts? Zero.

3. Good news for Italy. According to its European commitments, Italy should close its fiscal deficit in 2012.