Word: euros
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Thorbjorn Jagland, Secretary General of the Council of Europe Europe is hardly shrinking. The European project is far from perfect and the E.U. currently faces many challenges, from bolstering the euro, to creating a stronger presence in the international political arena. But I take issue with the article's premise that Europe is absent from the world stage - rather alarmingly illustrated by your cover page illustration...
...effect of this spat has been to push the euro to a four-week low against the dollar as investors fret over the uncertain prospect of support for Greece. The euro closed on Tuesday at $1.35, down from a high of $1.51 in November. "The leaders are hardening positions but not for a clearly thought-out purpose," says Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy. "It looks more like a chicken farm than anything else...
...Other players have waded into the fray too. José Manuel Barroso, the European Commission president, has urged Merkel to agree on a package of "coordinated bilateral loans" for Greece - or risk harming the euro. European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy have also dismissed the IMF option, saying it would make the E.U. look incapable of resolving its own crises. (Sarkozy has his own reasons for keeping the IMF at bay: its managing director, Dominique Strauss-Kahn, is a potential rival in France's 2012 presidential election.) Others, like French Finance Minister Christine Lagarde...
...could lift the pressure for reform in Greece. "That would risk setting a precedent of profligate countries taking advantages of the others," says Silvio Peruzzo, a London-based analyst at the Royal Bank of Scotland. "If you set up a bad incentive, then you undermine the credibility of the euro zone. In that sense, the Germans are much more forward-looking." (See pictures of the dangers of printing money in Germany...
...political risks of Germany's conceding too soon but that she cannot hold out indefinitely. "It is implausible that Greece could get through the rest of this year unaided," he says. "Ultimately, the Germans will put something on the table. They will always defend the stability of the euro...