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When the President of the European Central Bank (ECB) Dear Mario said he would do whatever is necessary to ensure the future stability of the euro, the effect of his remarks was immediate and remarkable. Borrowing costs of Spain and Italy declined dramatically, the markets went up and the decline of the euro was off.
It remains unclear however whether the statements Dear may have lasting effects, and support they have his German Chancellor Angela Merkel, French President Francois Åland and Italian Prime Minister Mario Monti, the online edition writes about project-syndicate.org Peter Sutherland, who heads Goldman Sachs International and London School of Economics.
The reaction of the markets after the speeches of the President of the ECB, however, suggest that the main problems of the euro area are not financial and economic, political, psychological and institutional points Sutherland.
International observers took to heart the statement Dear Mario, he will do whatever is necessary for the euro because they doubt the commitment and willingness of many other European politicians to do the same.
The inability of eurozone leaders to allay doubts about its commitment to the euro after two and a half years of crisis shows that the problem is very deep. In its defense, the leaders of the eurozone prepare a series of reforms designed to stimulate economic modernization, restore sound public finances and move towards closer economic coordination.
According to Peter Sutherland, however, even these reforms do not give a clear and definite answer whether the most prosperous countries of the European currency bloc are absolutely committed to the cause to keep it.
There is no doubt that Germany and other countries of the European monetary community would prefer the euro to survive. Suspicions are that this will happen through a change in national policies and push for reforms in certain countries in the currency bloc, said the economist.
Since the crisis at the heart of the relationship between members of the euro area is the control. Trust between parties is no longer taken for granted and large countries may have done much for the financially troubled economies, but it is highly contingent and transient.
It is understandable on one hand that healthy economies insist on assurances that their resources will be wasted. This constant need for reassurance, however, provokes fear in time to trust their partners will not be enough. If this happens, the collapse of the euro will not tarry.
Solidarity and predictability in international relations based on common interests and institutions will ensure prosperity and stability of Europe much more effectively than traditional balanced by high diplomacy, whose representatives often fail, says Peter Sutherland.
The euro was created in this spirit of solidarity and its contribution to alleviate the economic and financial turmoil in Europe during the last five years should not be underestimated.
The economist, however, is of the opinion that Germany began to realize what it would be economic devastation if the eurozone breaks. German politicians have important democratic responsibility for taking reasonable steps to avoid disaster.
It would be misleading to imagine that the euro area have only to follow its present course, to ensure the future of the single currency. If nothing else, the current course unacceptably focuses on the differences between Member States in a way that is politically and economically unsustainable in the long run.