Greece: Debt problem unsolved
For the past year there has been a pattern to the eurozone crisis. Denial followed by the very events happening. There is now a high degree of scepticism about official statements.
So to last Friday's meeting of certain European finance ministers. There were denials that the meeting was taking place. Then it was confirmed. Then it was said that there were a number of subjects discussed including Greece.
Almost certainly it was an emergency meeting about Greece. The Dutch, for one, were furious to be deceived and excluded.
The meeting in itself was revealing. For months a wide range of observers have said that Greek debt is unsustainable. It is only increasing without the country displaying any signs of growth, with the slight exception of the tourist industry. So it was a moment of near-clarity when the head of the 17-nation Eurogroup, Jean-Claude Juncker, said after Friday's meeting that "we think that Greece does need a further adjustment programme."
Let's get to the point. The £96bn (110bn-euro) Greek bail-out has not worked. Its sovereign debt is heading higher, towards 340bn euros. The country's debt is now approaching 160% of GDP - equivalent to more than a year-and-a-half of its entire economic output.
The Greek economy is due to shrink by 2.7% this year. Government revenues are less than expected and the old culture of tax evasion has survived.
So what's to be done? Many believe there will have to be some restructuring of the debt. Sooner or later. Just a few weeks ago EU officials were all saying restructuring was not an option. It was however discussed on Friday, although no decision was taken.
So suddenly all kinds of ideas are on the table. There may be a Greek bail-out Mark 2 with a further 20-25bn euros. The deadlines for bringing down the deficit could be eased, although the Germans won't like that. It could be that the main bail-out fund could be used to buy Greek bonds. The maturing of Greek bonds could be postponed, but that would be a form of rescheduling.
In all of this it is worth remembering that German and French banks have an exposure of more than 300bn euros to Greek, Irish and Portuguese debt.
Next week's meeting of the Eurogroup and the European finance ministers may prove a significant moment.
Any easing of the Greek bail-out terms will be watched most closely in the Republic of Ireland. If Greece, why not us?
Whether he was speaking officially or not the Irish Minister for Energy, Pat Rabbitte, said yesterday: "quite frankly the interest rate for Ireland must be reduced and in my own view the debt must also be rescheduled". Suddenly the terms of all the bail-outs are back in play.
Portugal, too, is taking more than a passing interest in this. There are signs that its bail-out will be less demanding. There will be less austerity. It is an acknowledgement that the other bail-outs are choking growth. "Some lessons have been learnt, " said the Commerzbank analyst David Schnautz. The Portuguese targets are "much more realistic".
Any softening of the terms may spark a political reaction in the northern European countries. The initial bail-outs have proved a hard sell. Putting more money on the table will only bolster those who argue that Greece should be shown the door.
To the issue that caused a tremor in the markets on Friday: that Greece may opt to leave the euro. It has been met with fierce denials. For the moment it seems a highly unlikely option. And yet in German circles it is being discussed.
In Berlin at government level the idea is dismissed. The Economy Minister, Rainer Bruederle, said yesterday: "our goal must be to strengthen Europe". But elsewhere some, like Hans-Werner Sinn of the Ifo Institute, see a Greek exit as preferable to permanent fiscal transfusions from German coffers.
For the moment the most likely outcome is that Greece will be given some extra help, but the fundamental problem will not have been addressed. Can you have monetary union without fiscal union? And can you have fiscal union without political union - for which there is almost no appetite?
On this Europe Day, the problems of the euro cast a shadow over the European project. Bail-outs are deepening divisions between the northern European countries and the south.
The fall-out is a rise in scepticism towards the EU. European officials will today eloquently point to the success of a Europe reborn after the horrors of war. All of that is true, but the challenge today for the EU is to sell itself not just on the past but on whether it can deliver on growth, jobs, immigration - the big issues of the day.