Fiddling while Rome burns

THE day of reckoning has come much closer. Like an alcoholic who decides to “drink through” his hangover rather than retreating from the bar, the West’s major economies have spent the last four years trying to spend their way out of recession. It only postponed the inevitable, however, and a near meltdown in public finances and the value of shares is now upon us.

The eurozone economies are in crisis and it is a state which Britain and, belatedly, America, have only avoided because of some harsh austerity measures. The collapse in the confidence of investors that governments will be able to pay their debts forced the bailouts of Greece, Ireland and Portugal and is now sinking Spain and Italy. As such, it is a serious concern for this country, because Europe is our biggest trading partner.

Britain will escape the worst of the continent’s troubles but the reluctance of the European Central Bank to buy the government bonds of Spain and Italy marks a severe escalation in the world’s financial problems. The Mediterranean nations, as one commentator said yesterday, are “too big to fail and too big to save”.

Such apocalyptic warnings are a clear reminder of the onset of the banking crisis in 2008. Then, as now, political and business leaders enjoying the summer were slow to spot the clouds on the horizon, as a result of which many banks came to within a hair’s breadth of disappearing altogether.

The bail-outs of three years ago have effectively transferred the risk and the bills from the private sector to the public sector. The lack of early leadership is, once again, very apparent. Now the EU and the eurozone, despite having four separate presidents, still fiddle while Rome is very close to burning.

If anyone can take control of the eurozone, and spare Britain from another costly foreign intervention, then it is Angela Merkel, the German Chancellor, and Christine Lagarde, the head of the International Monetary Fund. The European Central Bank has neither the cash nor the clout to shore up Italy and Spain; America is busy tackling its own problems and any nations which ask Russia or China to prop them up could find themselves emasculated. That the fate of the euro could be held in the hands of so few people marks how low it has sunk.