UNHAPPY UNION is Europe editor and a former Brussels correspondent of The Economist He was previously Washington correspondent and business affairs editor JOHN PEET is Brussels correspondent of The Economist and writes the Charlemagne column He was previously The Economist’s defence correspondent, after working for two decades as a foreign correspondent in the Middle East and Africa He is the author of Holy Land, Unholy War: Israelis and Palestinians (Penguin, 2006) ANTON LA GUARDIA OTHER ECONOMIST BOOKS Guide to Analysing Companies Guide to Business Modelling Guide to Business Planning Guide to Cash Management Guide to Commodities Guide to Decision Making Guide to Economic Indicators Guide to Emerging Markets Guide to the European Union Guide to Financial Management Guide to Financial Markets Guide to Hedge Funds Guide to Investment Strategy Guide to Management Ideas and Gurus Guide to Managing Growth Guide to Organisation Design Guide to Project Management Guide to Supply Chain 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part of this book may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the publisher of this book, except in the case of brief quotations embodied in critical articles and reviews For information, address PublicAffairs, 250 West 57th Street, 15th Floor, New York, NY 10107 The greatest care has been taken in compiling this book However, no responsibility can be accepted by the publishers or compilers for the accuracy of the information presented Where opinion is expressed it is that of the author and does not necessarily coincide with the editorial views of The Economist Newspaper While every effort has been made to contact copyright-holders of material produced or cited in this book, in the case of those it has not been possible to contact successfully, the author and publishers will be glad to make amendments in further editions PublicAffairs books are available at special discounts for bulk purchases in the U.S by corporations, institutions, and other organizations For more information, please contact the Special Markets Department at the Perseus Books Group, 2300 Chestnut Street, Suite 200, Philadelphia, PA 19103, call (800) 810-4145, ext 5000, or e-mail special.markets@perseusbooks.com Library of Congress Control Number: 2014936676 HC ISBN: 978-1-61039-449-9 e-book ISBN: 978-1-61039-450-5 First Edition Contents List of figures Acknowledgements Preface 10 11 12 “If the euro fails, Europe fails” From the origins to Maastricht How it all works Build-up to a crisis Trichet’s test Super Mario The changing balance of power In, out, shake it all about Democracy and its discontents How the euro spoilt any other business Europe’s place in the world After the storm Notes Appendices Timeline Treaties, regulations and pacts Further reading How The Economist saw it at the time Index List of figures 4.1 4.2 5.1 6.1 6.2 6.3 9.1 12.1 12.2 12.3 12.4 GDP, 1999–2014 Ten-year bond yields, 1995–2010 Ten-year bond yields, 2010–2012 Spain: five-year CDS premiums on sovereign and bank debt, 2007–12 Ten-year bond yields, July 2011–December 2013 Interest on loans to non-financial corporations up to €1m, 2007–14 Positive opinions of the EU, 2003–13 Euro zone and US GDP at constant prices, 2007–14 Public debt, 1999–2014 Unemployment rate, 1999–2014 Current-account balance, 2004–14 Acknowledgements MANY POLITICIANS, OFFICIALS, diplomats, academics, think-tankers and fellow journalists have helped us to form our ideas and write this book, some without realising it A large number of people gave generously of their time and shared their insights (and often their personal notes of events), but wish to remain anonymous We would like to thank them all For the Charlemagne columnist covering the twists and turns of the crisis from Brussels, the press corps has been a source of good cheer and comradeship, and a forum for the exchange of information, through endless late-night meetings of European leaders and finance ministers The colleagues and guests of the “Toucan” dinner club have produced many enlightening and enjoyable evenings The job of interpreting events has been made much easier thanks to the expertise of scholars who follow the often arcane affairs of the EU They include staff at the Brussels think-tank, Bruegel – among them Guntram Wolff, Jean Pisani-Ferry, André Sapir, Zsolt Darvas and Silvia Merler – who have offered invaluable expertise over the years Similarly, Daniel Gros at the Centre for European Policy Studies has been a source of sharp perspective On questions of Europe in the wider world many have been helpful and incisive, among them Jan Techau at Carnegie Europe, Daniel Keohane at FRIDE, Sir Michael Leigh at the German Marshall Fund of the United States, as well as the many experts of the European Council on Foreign Relations Philippe Legrain, formerly at the European Commission’s Bureau of European Policy Advisers, has been refreshingly trenchant and forthright in his views of where Europe has gone wrong We would like to thank Stephen Brough, Penny Williams and Jonathan Harley for incubating this book and seeing it through to completion with charm and patience, despite many interruptions and changes to the manuscript Andrea Burgess and Roxana Willis at The Economist have been indefatigable researchers in finding data and producing charts We owe a special thanks to several people who took the time to read drafts of our manuscript and commented on all or parts of it They include Charles Grant and Simon Tilford at the Centre for European Reform and Heather Grabbe at the Open Society Foundations, as well as our colleagues at The Economist, Edward Carr and Zanny Minton Beddoes No one can write a book without being a burden on their families Accordingly, we dedicate this one to our ever-supportive spouses, Sara and Jane Preface on being a model for the rest of the world of how to reconcile old enemies after centuries of war, blend the power of capitalism with social justice and balance work with leisure Little matter that Europeans did not generate as much wealth as overworked Americans; Europeans took more time off to enjoy life And little matter that Europe could not project the same military force as the United States; Europe saw itself as a “normative power”, able to influence the world through its ability to set rules and standards Some Europhiles even imagined that Europe would “run the 21st century”, as the title of one optimistic book put it.1 The collapse of subprime mortgages in the United States, and the credit crunch that followed, only confirmed such convictions The single currency, the European Union’s most ambitious project, was seen as a shield against financial turbulence caused by runaway American “ultra-liberalism”, as the French liked to describe the faith in free markets But when the financial storm blew in from across the Atlantic, the euro turned out to be a flimsy umbrella that flopped over in the wind and dragged away many of the weaker economies It led to the worst economic and political crisis in Europe since the second world war Starting in May 2010, first Greece, then Ireland and Portugal were rescued and had to undergo painful internal devaluation, that is, by reducing wages and prices relative to others The process proved so messy and bitter that, even with hundreds of billions of euros committed to bail-outs, the currency several times came close to breaking up, potentially taking down the single market and perhaps the whole EU with it The EU’s hope of becoming a global power dissolved as Europe became the world’s basket case More than once, the United States forcibly pressed its transatlantic allies and economic partners to more to fix their flawed currency union At the time of writing, in March 2014, the euro zone has survived the financial crisis – an achievement in itself, but won at too high a price The euro zone bottomed out of its double-dip recession in 2013 But despite signs of “Europhoria” in markets the danger is far from over Among Europhiles and Eurosceptics alike, there is a growing belief that the euro has undermined, and may yet destroy, the European Union Instead of promoting economic integration, euro-zone economies have diverged Rather than sealing post-war reconciliation, the euro is creating resentment between north and south Far from settling the age-old German question, Germany has emerged as allpowerful The decline of France has accelerated, and the ungovernability of Italy has been reaffirmed Tensions between euro “ins” and “outs” have increased, particularly in the case of the UK, which now hovers ever closer to the exit The chronic democratic problem has become acute: the EU is intruding ever more deeply into national policymaking, particularly in the euro zone, without becoming any more accountable to citizens Perversely, the clearest sign of a common political identity, the European “demos” that federalists hoped would emerge, is to be found in anti-European movements For now the riots and clouds of tear gas in Greece and the mass protests by Spain’s indignados may have faded away But almost everywhere, apart from Germany, which has barely felt the crisis, EUROPE HAS LONG PRIDED ITSELF indignant voters have thrown out incumbent governments and abandoned centrist parties in large numbers Anti-EU and anti-euro parties are on the rise, of both left- and right-wing varieties, in both core and periphery countries, and in both euro ins and euro outs The scariest are in Greece, which has both radical leftists and neo-Nazi extremists, and has witnessed murderous violence among their followers But the most consequential may yet be the scrubbed-up, besuited populists in countries such as France, the Netherlands and the UK, which were hardly the worst hit by the debt crisis They have already changed the terms of the European debate in these countries Once the champion of EU enlargement, the UK is increasingly turning against the cherished right of free movement of workers, and against the EU itself As the countries of the euro-zone periphery seek to regain competitiveness, their most striking export has been young emigrants in search of jobs abroad These are no longer the manual workers of yesteryear who filled the factories of Germany, the mines of Belgium and the building sites of the UK Now it is the young graduates who are on the move In Portugal, the post-colonial flow has reversed, as hopefuls head out to Brazil, Angola and Mozambique in search of a better life In Ireland, some churches have set up webcams so that émigré parishioners can watch services back home Many have moved to other parts of Europe, notably Germany The story of how the European project was born, how the euro nearly died, how it was saved and how the EU should confront the dangers ahead is the subject of this book The appendices provide a timeline, a glossary and the history of the crisis as told through covers of The Economist Chapter recounts the darkest days, when the European Central Bank (ECB), the International Monetary Fund (IMF) and others made secret preparations for the departure of Greece from the euro, and the possible collapse of the currency zone The consequences, all agreed, were incalculable Chapter shows how the idea of European integration was born from the political necessities of the early 1950s, with Europe emerging from the ruins of the second world war and then having to confront the challenge of the cold war The euro was launched as a result of the failure of repeated attempts to fix exchange rates between European economies, and the desire to anchor a unified Germany more firmly within Europe after the collapse of the Berlin Wall The system that was created through successive treaties was a complex hybrid with elements of federalism and intergovernmentalism, a pantomime horse that was part United States and part United Nations Chapter explains the functioning of the EU, and the flawed structure of the euro, to help make clear how Europeans managed, and mismanaged, the crisis Chapter shows how the launch of the euro was at first met with scepticism by outsiders, then treated with hubris by insiders Blinkered by the fiscal rules, European institutions were for the most part unaware of the real danger to the monetary union It did not come only, or mainly, from the accumulation of deficits and debt, which became easier for many countries to finance as interest rates fell Rather, the bigger menace came from underlying external imbalances, with current-account deficits allowed to balloon in the belief that these would always be financed within a currency union As the financial crisis turned into a debt crisis in early 2010, European leaders and institutions muddled through from summit to summit, devising responses that were always too little, too late, and raised the cost for all There were two broad phases, coinciding roughly with the tenures of JeanClaude Trichet and Mario Draghi as presidents of the ECB, as noted in Chapters and First there was a period of banking crises, bail-outs, austerity and debt restructuring – focused most acutely in Greece This increasingly fraught time culminated in angry confrontations at the G20 ETS (emissions-trading scheme) 135–136 EU 2020 strategy 137 euro break-up contingency plans 2–3 convergence criteria 14–16, 41, 112, 193 crash danger 47–48 introduction of 4, 18 notes and coins 18 special circumstances 3–4 euro crisis effect on world influence 143–146 errors 155–161 focus of attention 135–141 Euro Plus Pact 55, 195 euro zone economic dangers 175–178 increasing significance of institutions 113–114, 120 performance compared with US 154–155 political dangers 175–178 political integration 125 trust 173 Eurobonds 54, 59, 74, 166–167 Eurogroup of finance ministers 24, 114 European Banking Authority 114, 195 European Central Bank (ECB) bond-buying 47–49, 59–60 crisis-management planning 2, delays 156 European System of Central Banks 22 liquidity provision 40–42, 68–70 outright monetary transactions (OMT) 79–81, 164, 175–176 role and function 22–24, 39–40, 170–171 supervision 6, 99, 175, 195 troika membership 160–161 European Coal and Steel Community (ECSC) 7–8 European Commission commissioners 19, 172 errors 160 future direction 171–172 influence and power 96–97, 99, 119, 125 intrusiveness 127, 140–141 organisation 19 presidency 131, 144 proposals for economic governance 50 European Community 12 European Council 20, 98–99 European Court of Human Rights 21 European Court of Justice 21 European Defence Community European Economic Community (EEC) European External Action Service (EEAS) 142, 144 European Financial Stabilisation Mechanism (EFSM) 48 European Financial Stability Facility (EFSF) 26, 48, 55, 60–61, 81, 194 see also European Stability Mechanism (ESM) European Financial Stability Mechanism 26 see also European Stability Mechanism (ESM) European Investment Bank 21 European Monetary Institute 22 European Monetary System (EMS) creation of 11 exchange-rate mechanism 16 membership 15 European Parliament 20–21, 97–98, 99, 100, 119, 121, 129–132, 171 European People’s Party 117, 127, 130–131 European Political Co-operation 142 European semester 25, 195 European Stability Mechanism (ESM) 194 establishment 26, 55, 80–81 operations 58, 75, 76, 91 European Systemic Risk Board 41 European Union driving forces for monetary union 12–13 expansion 26 historical background 7–12 treaty making 26–28 world influence 140, 142–150 European Union Act (2011) 117, 132 Eurosceptics 13, 123 Finns Party 124 Jobbik 125 League of Catholic Families 125 National Front 124 Party of Freedom (PdL) 124 UK Independence Party (UKIP) 118, 125, 140 excessive deficit procedure 24, 88–89, 194, 195 exchange-rate systems 3, 9–11 exchange rates 164 F Farage, Nigel 98, 118 Federal Deposit Insurance Corporation (FDIC) 77 Federal Reserve (US) 23, 47, 48, 157 federalism 19, 110, 116, 161–165, 168–170, 177–178 financial integration 35–36 financial supervision 195 ECB 6, 99, 175, 195 Jacques de Larosière proposals 41 national 23, 35 single supervisor 76–77, 83–84, 90 Finland accession 26, 111 Finns Party 124 influence 108 ministerial accountability 133 fiscal capacity 84 fiscal compact treaty 25–26, 64–65, 118, 194–195 fiscal policy, focus on 30–31 Five Star Movement 124, 126 fixed exchange-rate systems 3, 9–10 Foot, Michael 116 forecasts, growth 92 foreign policy 142–143 Fouchet plan 22 France credit rating 69, 103 current-account balance 168 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 and Greece 44 influence 100–104, 142–143 Maastricht deal 12, 16 public debt 159 public opinion of EU 123, 124 single currency views 16–17 unemployment 159 veto of UK entry 115 vote to block European Defence Community freedoms of movement 8, 13 G Gaulle, Charles de 9, 22, 96 Gazprom 136 GDP growth 32 Georgia 149 Germany 2013 elections 90, 106, 125 bond yields 37, 89 Bundesbank 16, 23, 157 constitutional (Karlsruhe) court 45, 95, 128, 158 credit rating 69, 77–78 crisis management errors 155–156 current-account surplus 89, 105, 167–168 demands post Greek bail-out 50–51 economic strengths and weaknesses 14 GDP growth 32 and Greece 44 influence 100–106 Maastricht deal 12, 15–16 national control and accountability 128, 133 parliamentary seats 100 political parties 93, 125 public debt 159 public opinion of EU 123 unemployment 159 unification 16 Zollverein Giscard d’Estaing, Valéry 11, 18, 26, 100 Glienicker group 163, 170 gold standard 9–10 Golden Dawn 124 government spending (worldwide) governments, insolvency of 50 great moderation 31 Greece 2012 election 73, 126 bail-out deal 45–47, 56–58, 65–67, 70, 158 bond yields 37, 61–62 current-account balance 168 debt crisis 42–45 euro membership 18, 112, 115 finances post bail-out 93–94 finances pre-crisis 30, 71 GDP growth 32 potential euro exit 1–5, 81–83 public debt 159, 166 public opinion of EU and euro 113, 123, 124 referendum on bail-out 2, 61–62 unemployment 159 Gros, Daniel 34 H Hague, William 151 Haider, Jörg 127 Hamilton, Alexander 162, 167 Heath, Edward 10, 116 Heisbourg, Franỗois 104 Hollande, Franỗois 7374, 89, 103104, 127 proposed reforms 177 Hungary 41, 113, 126, 147 Hypo Real Estate 41 I Iceland 53, 147 ideological differences 114–115 IKB Deutsche Industriebank 40 immigration 139–140, 146, 147 impossible trinity 13 inter-governmentalism 96, 128, 174 interest rates 93, 164 internal devaluation 31, 65–66 International Monetary Fund (IMF) banking union 74 crisis-management planning 2, 4–5 Cyprus 86–87 errors 160–161 euro zone support 48 Greece 44–46, 56–57, 66, 83, 93–95, 160 Latvia 65 rainy-day funds 169–170 special drawing rights (SDR) 63 Iraq 143 Ireland 89, 110 bail-out 53–54, 56, 57, 89 bank crises 40, 71 bond yields 37, 47, 53, 61, 89 current-account balance 168 finances pre-crisis 30 GDP growth 32 influence 107 opt-outs 111, 139 public debt 159, 166 public opinion of EU 123 referendums 27, 28, 132 unemployment 159 Italy 2013 elections 107, 124, 126 bond yields 37, 61, 89 convergence criteria 17 current-account balance 168 danger of collapse 59 EMS exchange-rate mechanism 16 excessive deficit procedure 89 GDP growth 32 influence 100, 104, 107 interest rates 93 public debt 159, 166 public opinion of EU 123 single currency views 17 unemployment 159 J Jenkins, Roy 11 Jobbik 125 Juncker, Jean-Claude 98, 104, 177 candidate for Commission Presidency 131 EU 2005 budget crisis 28 Eurobonds 54 Eurogroup president 24 justice and home affairs (JHA) 139 K Karamanlis, Kostas 42 Karlsruhe constitutional court 45, 95, 128, 158 Kauder, Volker 105 Kerry, John 144 Kohl, Helmut 12, 18, 100 L labour markets 14, 33–34 Lagarde, Christine 51, 58, 62, 92 Laiki 86–88 Lamers, Karl 111 Lamont, Norman 17 Larosière, Jacques de 41, 74 Latin Monetary Union Latvia 41, 65, 67, 88, 108 Lawson, Nigel 16 League of Catholic Families 125 legislative path 21–22 Lehman Brothers, ECB reaction to collapse Letta, Enrico 107–108 Libya 143, 145 Lipsky, John 57 Lisbon treaty 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Lithuania 88, 113, 153 Long Term Refinancing Operations (LTRO) 68–70, 72 Luxembourg 77–78, 100, 108, 169 Luxembourg compromise 97 M Maastricht treaty 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 MacDougall report (1977) 13, 169 Major, John 12, 111, 116 Malta 100, 112 Maroni, Roberto 34 Mayer, Thomas McCreevy, Charlie 41 MEPs 20–21, 130 Merkel, Angela 2013 re-election 90 banking union 74–77 Cannes G20 summit (2011) 63–64 crisis response 40–41, 44 European constitution 28 fictitious memorandum to future direction 178 power and influence 89, 102–106, 153 Sarkozy collaboration 60, 61–62, 102–103 support for Cyprus 86 support for Greece 5, 45, 49–52, 81–82 support for UK 118–119 union method 22, 128 voter support 125 Messina conference 8, 115 migration 139–140, 146, 147 Miliband, David 144 Mitterrand, Franỗois 11, 12, 18, 100 Mody, Ashoka 163 Moldova 149 Monnet, Jean 8, 152 Montebourg, Arnaud 104 Montenegro 147 Monti, Mario 64 influence 70, 75–76, 107 A New Strategy for the Single Market (2010) 137–138 Morocco 146 Morrison, Herbert Morsi, Muhammad 145 Moscovici, Pierre 75 multi-annual financial framework 21, 27, 118 Mundell, Robert 12–13 mutualisation of debt 74, 103, 166–167 N national budgets 89, 125 National Front 124 NATO defence spending targets 145 European security membership 110 Netherlands credit rating 77–78 excessive deficit procedure 89 influence 100, 108 ministerial accountability 133 UK sympathies 119 Nice treaty 194 no-bail-out rule 45, 162, 163–165 north–south divide 33–34, 108 Northern Rock 40 notes and coins 18 Nouy, Danièle 90 Nuland, Victoria 149 O Obama, Barack 63 official sector involvement (OSI) 83 OMT (outright monetary transactions) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 optimal currency-area theory 12–13, 14–15 Orban, Viktor 126 Osborne, George 117, 119 OSI (official sector involvement) 83 outright monetary transactions (OMT) 79–81, 164, 175–176 Germany’s constitutional court judgment 95, 128 P Pact for the Euro see Euro Plus Pact Papaconstantinou, George 43 Papademos, Lucas 64 Papandreou, George 56, 60 election 43 Greek referendum 61–62 resignation 2, 64 Party of Freedom 124 Poland 109, 113 Policy Exchange political parties 124–125, 139–140 political union 10, 12, 133–134 Pompidou, Georges 10 Poos, Jacques 143 Portugal 110 bail-out 54, 57, 89–90 bond yields 37, 47, 53, 61, 89 public opinion of EU and euro 113 power, balance of 99–101 price stability goal of ECB 23 private-sector involvement (PSI) in debt restructuring 51–52 Prodi, Romano 17, 25, 97 Progressive Alliance of Socialists and Democrats (S&D) 130–131 public debt 15, 158–159 see also sovereign debt public opinion of EU and euro 121–124 Putin, Vladimir 149–150 Q qualified-majority voting 13, 20, 99, 121 negative qualified-majority voting 25, 195 quantitative easing (QE) 47, 15 R Rajoy, Mariano 70, 75–76, 127 recapitalisation, bank 58–59, 74–77, 84 redenomination 3–4, 153–154, 175 Reding, Viviane 139 referendums 27, 28, 121–122, 132 REFIT initiative 172 Regling, Klaus 26 Renzi, Matteo 107–108 rescue fund see European Stability Mechanism (ESM) resolution mechanism 90–91, 165, 195 single resolution mechanism (SRM) 195 single supervisory mechanism (SSM) 195 Romania 41, 108, 113, 124, 126, 147 Rome treaty 8, 97, 110, 193 Rösler, Philipp 78 Rueff, Jacques Rumsfeld, Donald 143 Russia, influence on Ukraine 149–150 Rutte, Mark 77 S Samaras, Antonis 2, 78, 82, 93–94 Santer, Jacques 97 Sarkozy, Nicolas crisis response 40–41, 44 economic governance 49–50 European constitution 28 LTROs and the Sarkozy trade 69 Merkel collaboration 51–52, 60, 61–62, 102–103 Schäuble, Wolfgang 62, 75, 84, 90–91, 106, 111, 154 Schengen Agreement 110, 111–112 Schmidt, Helmut 11, 100 Schröder, Gerhard 18, 101, 127 Schulz, Martin 131 Schuman Day Schuman, Robert 7–8 Scotland 112, 178 SDR (special drawing rights) 63 Securities Market Programme (SMP) 48, 79 services directive 34 Shafik, Nemat 65 Sikorski, Radek 109 Simitis, Costas 18 Simms, Brendan 179 single currency benefits 152 club within a club 112 driving forces 12–14 importance of 113 vision for see also euro Single European Act 13, 193 single market 4, 137–138, 174–175 Sinn, Hans-Werner 101 six-pack 25, 50, 195 Slovakia 112 adoption of euro 41 influence 108 Slovenia 88–89, 112 influence 108 SMP (Securities Market Programme) 48, 79 snake in the tunnel 10 Solana, Javier 142 sovereign debt 165–166 see also public debt Spain 110 bail-out 70–73, 89 bank recapitalisation 84 bond yields 37, 89 CDS premiums 72 current-account balance 168 danger of collapse 59 excessive deficit procedure 89 finances pre-crisis 30 GDP growth 32 influence 107 public debt 159 public opinion of EU 123, 124 single currency views 17 unemployment 159 special drawing rights (SDR) 63 stability and growth pact 18, 24, 29, 50–51, 127, 194 Stark, Jürgen 59, 106 Steinbrück, Peer 43 Strauss-Kahn, Dominique 24, 44, 57 stress tests, bank 72, 175 subsidiarity 133, 141 Sweden 109, 111, 112 euro opt-out 18, 115 UK sympathies 119 Syria 145 Syriza 124 T Target II 157 Thatcher, Margaret 27, 110, 116 third energy package 136 Tilford, Simon 34 Tindemans, Leo 111 trade policy 138 Transatlantic Trade and Investment Partnership (TTIP) 138–139 treaty making and change 26–27, 173–174 Treaty of Amsterdam 111–112, 193 Treaty of Lisbon 28, 45, 194 foreign policy 142 institutions 20, 131 justice and home affairs (JHA) 139 subsidiarity 133 voting 20, 114 Treaty of Nice 194 Treaty of Rome 8, 97, 110, 193 Treaty on European Union (Maastricht treaty) 11–12, 15, 22, 142, 193 opt-outs and referendums 16, 110–111 Treaty on Stability, Co-ordination and Governance (TSCG) see fiscal compact treaty Tremonti, Giulio 54, 60 Trichet, Jean-Claude 151, 156 bond-buying 47–48, 52–53 crisis-management planning early warnings 39–40 ECB president 23 IMF 44 Italy 59 True Finns 124 Turkey 132, 147, 148 Tusk, Donald 109, 114 two-pack 25, 89, 195 U UK Independence Party (UKIP) 118, 125, 140 Ukraine 149–150, 179–180 unemployment 158–159, 170 union method 19, 22 United Kingdom current-account balance 168 economic strengths and weaknesses 14 EMS exchange-rate mechanism 16 euro crisis reaction 117–118 euro membership 112 European budget contribution 27–28 European involvement 8, 10, 12, 115–119 future status 174–175 influence 100–101, 106, 109, 142–143 initial application to join EEC opt-outs 110–111, 139 public opinion of EU 123 single currency views 17 United Left party 124 United States abandonment of gold standard 10 federalism model 177 foreign policy 143 performance compared with euro zone 154–155 Urpilainen, Jutta 77 V Van Gend en Loos v Nederlandse Administratie der Belastingen (1963) 21 Van Rompuy, Herman 98 crisis-management planning Cyprus 87 European Council presidency 20, 28 Italy 63 roadmap for integration 74–75, 84, 173 support for Greece 43–45 Venizelos, Evangelos 57, 62 Verhofstadt, Guy 131 Véron, Nicolas 35 Vilnius summit 149 von Weizsäcker, Jakob 166 W Waigel, Theo 17–18 Wall Street flash crash 47 Weber, Axel 49, 56, 106 Weidmann, Jens 40, 80, 82 Weizsäcker, Jakob von 166 Werner report (1971) 10 Wilson, Harold 116 Wolfson Prize World Bank 33 World Trade Organisation 138–139 Y Yanukovych, Viktor 149 Z Zapatero, José Luis Rodríguez 59, 62 Zollverein PublicAffairs is a publishing house founded in 1997 It is a tribute to the standards, values, and flair of three persons who have served as mentors to countless reporters, writers, editors, and book people of all kinds, including me I F STONE, proprietor of I F Stone’s Weekly, combined a commitment to the First Amendment with entrepreneurial zeal and reporting skill and became one of the great 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Figures UNHAPPY UNION How the euro crisis – and Europe – can be fixed John Peet and Anton La Guardia THE ECONOMIST IN ASSOCIATION WITH PROFILE BOOKS LTD AND PUBLIC AFFAIRS Copyright © The Economist... be the scrubbed-up, besuited populists in countries such as France, the Netherlands and the UK, which were hardly the worst hit by the debt crisis They have already changed the terms of the European... notably Germany The story of how the European project was born, how the euro nearly died, how it was saved and how the EU should confront the dangers ahead is the subject of this book The appendices