Oct. 18 (Bloomberg) -- On this day in 2009, German Chancellor Angela Merkel was working on her second-term tax cuts and French President Nicolas Sarkozy was preparing a speech on territorial reform. With the euro at an uncomfortably high $1.49, then-European Central Bank President Jean-Claude Trichet was set to go to China for currency diplomacy.
Near midnight on that Sunday in Athens, a two-week-old government announced that the year’s budget deficit would hit 30 billion euros ($39 billion), six times more than the 5 billion euros it had expected.
“The figures are infuriating,” George Papaconstantinou, the new Greek finance minister, told parliament.
It took months for the realization to sink in that the euro’s survival, not just one country’s balance sheet, was at stake. Since then, some 486 billion euros have been spent or pledged to save Greece, Ireland, Portugal and Spain’s banking system, with more in the offing; leaders have set up two rescue funds and called in the International Monetary Fund; and the central bank has jettisoned its founding ideology to backstop fiscally irresponsible governments.
A currency designed to unite Europe has divided it between a richer north and economically desperate south. Unemployment in Spain and Greece is at 25 percent, compared to a jobless rate of under 5 percent in Austria.
Eleven of the 16 euro-area chiefs at the dawn of the crisis are no longer on the job -- with Merkel the most prominent exception and Sarkozy the most prominent victim.
Under the glare of world leaders and markets, Europe’s stewards have been regularly accused of misdiagnosing the crisis, exacerbating it, then doing too little, too slowly to re-establish confidence -- criticism that provides the subtext to today’s summit in Brussels, the 20th since Greece officially became Europe’s problem in February 2010.
Now, three years after Greece came clean about its finances, markets are calmed by the ECB’s pledge to do what it takes to preserve the euro.
“We’ve done a lot in these three years,” Merkel told German lawmakers in Berlin today before heading to the summit. “We’ve achieved a lot more than in previous years in Europe and the contours of a stability union are already clearly discernible.”
Divisions remain. In Athens, in a general strike today against the budget cuts demanded as conditions of a bailout, protesters hurled Molotov cocktails at police, and police fired tear gas back.
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