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Martin Callanan MEP: Greece's partial default will buy some time, but a second bailout will not be enough to save it

CallananMartin Callanan MEP is Chairman of the European Conservatives.

Crisis. What crisis? Certainly that's the feeling that I have been getting in recent weeks: not just in the European Parliament but around the EU institutions on the whole.

Since my last update, there has been a great deal of movement on the euro zone crisis, all aimed at kicking that now-infamous can a little further down the ever-lengthening road.

Firstly, we saw the European Central Bank pump even more cheap money into European banks under the so-called LTRO. The hope is that banks will then reinvest that money into the bond markets of Italy and Spain, in order to bring their yields down and give some space for economic reform. Some are questioning whether the actions of the ECB are nothing short of quantative easing. I think it is nothing short of a Ponzi scheme, fighting debt with more debt - this time on the ECB's own balance sheet.

Secondly, Greece finally managed to reach agreement with the majority of its private bondholders to take a so-called haircut on their bonds. The bondholders had Hobson's choice: lose some money in a haircut, or lose it all in a default. So, throughout the day, the percentage of bondholders joining the debt swap crept up like an old Blue Peter appeal totaliser. As the Greeks declared victory, I couldn't help but think of Neville Chamberlain at Heston airport declaring 'peace for our time', deluded about what had been achieved and detached from reality.

Greece's partial default and the ECB's pumping of money into the banking system will buy some time. But it is clear that the second bailout will not be enough. It was based on an eight-year best-case calculation for the Greek economy. Economic data published about a week ago showed that the Greek economy shrank by 7.5 percent in the last quarter - far more than expected. A third bailout is almost certain.

Amidst this backdrop, EU leaders met at the start of the month. Surely the Euro crisis would be top of the agenda? Not quite! This summit was lauded as the first non-crisis summit for a while: but only because Germany was not yet willing to take any of the tough choices regarding the size of the bailout funds. We all know that the Euro Tower of Babel will come crashing down right at the moment the German public get fed up with paying - so the best answer for Angela Merkel is to put off the tough decisions for as long as possible. Instead, the summit talked about 'jobs and growth'.

Worried that the meeting may produce another set of 'motherhood and apple pie' conclusions, our Prime Minister brought to the council a letter which set out a clear set of actions and priorities to kick-start growth. It was signed by him, Petr Necas (the other PM in the ECR family, from the Czech Republic) and ten other EU leaders from three political families including, for the first time, leaders from both northern European and southern European nations. You can read the letter here (pdf).

But Angela Merkel and Nicolas Sarkozy didn't sign it. So, unsurprisingly, the initial set of summit conclusions almost completely ignored it. Thankfully, our Prime Minister was far from alone around the council table, and, by the end of the meeting almost the entire letter had made it into the summit conclusions, which then set the agenda for future action.

I have argued that it is not enough for the EU to carry through many of the positive aspects of the EU leaders' letter (in fact, much of it is already being driven forward by my Conservative colleague, Malcolm Harbour, as chair of the internal market committee). I also believe that politicians in Europe need to stop only asking, 'what can we do?', and start asking, 'What can we undo?' Sometimes, politicians' actions destroy jobs and slow growth - as we have seen with rigid legislation such as the Working Time Directive.

Unfortunately, the conveyer belt of job-harming legislation seems to be mono-directional. The latest idea from the commission is for quotas for women on company boards. I agree that more women should be reaching top positions in industry, but surely quotas only undermine them by leaving them open to (usually fallacious) claims of tokenism? Such prescriptive laws are actually harming (particularly young) people's job prospects. Thankfully, on the boardroom quotas issue, my colleague Marina Yannakoudakis MEP has been arguing strongly against what she has called 'patronising' measures.

Oh, and in case you missed it, the fantastic new Fiscal Compact treaty was signed at the summit. Of course, signing is one thing; ratifying it is another. Ireland will have a referendum. Other parliaments have serious concerns. Even if the thing is fully ratified by all 25 signatories, its worthlessness has already been demonstrated. Sweden says it will not abide by its provisions. The Netherlands feels the lack of immediate pressure on their AAA rating should allow them to borrow more. Before the ink had even dried on the treaty Spain had announced it has no intention of staying within its deficit limits. This document is nothing short of a pointless distraction that undermines economic sovereignty whilst doing nothing to solve the crisis.

In the European Parliament last week, we had our usual debate on the outcomes of the summit in the presence of the EU's many Presidents (Van Rompuy, Barroso, Schulz etc). I repeated my call for Greece to be allowed to leave the Euro, and criticised Van Rompuy for failing to put the Cameron letter in the initial communication. Like other group leaders, I also responded to recent comments of Nicolas Sarkozy - in particular, his complaint that, 'there are too many foreigners in France.' I took great joy in telling him that I'm a foreigner who would happily come to his country less often - but it's his government forcing us to Strasbourg every month!

Finally, we held the by-election for the leadership of the Conservative delegation last week. As ConHome reported, I decided I couldn't go on holding the role of head of the UK Conservatives after being elected to lead our wider ECR group last December. Having fought for the formation of this group for over a decade, I was incredibly proud when it was finally created in 2009, and it is an enormous honour to now be leading it. It has become a formidable force for extending British and Conservative influence in Europe, giving us seats at the top table in the institution and many of its committees. I have great plans for the group and I want to focus all of my efforts on building on our success of the past three years.

You will have read here that Richard Ashworth was elected by the delegation to succeed me. Richard is a true gentleman and someone I have enjoyed working with since his election in 2005. His work on the budgets committee has been crucial in reining in some of the more outrageous demands for EU budget increases. I wish him all the best with the new role.


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