The foundations are in place for a spectacular festival of sporting achievement complete with medals, records and tears. Come the closing ceremony, there will have been sobs of joy and those of choking disappointment as the winners take gold and the losers are left with nothing.
The eurozone medals table
The UK Government is keen to use the Olympics as a showcase to attract further foreign investment and foster economic growth.
Meanwhile in Europe, there is no sign of a closing ceremony to the eurozone games. There continues to be winners and losers within the single currency, which is causing great division. The foundation of the euro was based on a belief by seventeen nations that everybody would be winners with access to cheaper credit and a larger marketplace in which to trade.
The economic theory that Europe would be stronger, bonded together by a common monetary policy and single currency, has been fiercely defended by politicians. However, in reality, just like the Olympics, there have been medals, records and tears.
Germany has been the main beneficiary of the eurozone, sitting on top of the medals table in terms of economic growth, employment and productivity. While peripheral nations enjoyed some early successes with access to cheap credit, this has proven unsustainable. One of those nations, Greece, has the highest borrowing costs with record levels of debt and a growing budget deficit.
It is not alone in creating records. Spain too is struggling to recapitalise its banks and is now dealing with the threat of bankruptcy in its regional governments. The Spanish, and others, require bailouts and access to further cheap borrowing to reduce these record debt levels in order to compete again on the international stage. This will be a challenge while the price of eurozone support is austerity. There will be further lamentation as governments slash spending and raise taxes to correct budget deficits.
Hollande leads France away from Germany
Surely the theory that everyone can win from a single currency has been well tested and proven to be pure fantasy. The proposed fix that would cheer the market is further and deeper unity on fiscal and political terms. In practice that would equate to the sharing of debt within the eurozone and the European Central Bank effectively acting as lender of last resort.
Following the election of François Hollande as President in France, Germany has lost its only ally to fiscal responsibility. The games will continue over the summer months until Germany makes up its mind about whether it wants to stay or leave the eurozone.
In reality, rather than the Olympics the eurozone games resemble more “Jeux sans Frontieres,” the European TV game-show of my youth. I can still remember Europeans dressed in giant foam costumes weaving and tottering to the sound of Stuart Hall’s laughter as they scrambled to win the coveted title – not an image you really want of those spending taxpayers money.
