Business Spectator

What Europe is still discussing and Germany is vehemently resisting – the transformation into a fiscal liability union – has long been achieved through the Target backdoor. Brace yourself for the day when Europe finally wakes up to its forgotten fourth crisis.

When Germany’s political Boxing Day comes on December 17, there could be some hidden surprises among the presents which may spoil a few politicians’ Christmas breaks. A hitherto obscure German backbencher now threatens to thwart the EU’s plans to save the euro.

The Chinese know that any money they dedicate to Europe would be a highly risky engagement. They realise that Europe’s growth inertia, debt dynamics and demographic change are condemning the Europeans to decades of slow decline. And they are fully aware that Europe’s social model is finished.

Here we are again, just a week after a supposed breakthrough for Europe, and the crisis is getting worse. First there was the alarming auction of Italian bonds last Friday; then the whole deal reached last week was effectively put on hold by the Greek prime minister on Tuesday. Expect more bad news in coming weeks and months as European growth stalls and ratings agencies will have another look at Italy, Belgium and France.

Australia may still be a lucky country (and perhaps it is still run by second-rate people), but the ‘tyranny of distance’ from the old centre of the West has turned into a blessing. Who would still want to be close to the economic disaster zones of the US or the European Union? Australia’s geography is finally working in its favour.

After the turbulent monetary history of Greece, it was surprising (to say the least) how easily Greece managed to become part of the eurozone. Either Greece had fundamentally changed its whole economic system as grown over two centuries overnight or Greece’s European partners had not learned their lessons from history.

As eurozone countries were once again engaged in a new round of emergency negotiations over Greece, bank recapitalisations and an extension to the EFSF rescue fund, the latest round of quantitative easing in the UK went almost unnoticed outside Britain.

Merkel won last week’s debate by making a mockery out of democracy, but she lost leeway for any further bailout packages. Meanwhile, the German public has reached the end of its tether with politicians, Greece and the euro.