Reuters Acloud of gloom hangs over Brussels ahead of yet another summit to thrash out yet another “comprehensive strategy” to tackle a sovereign debt crisis that Europe has failed for two years to stem, and that now threatens the world economy. Gallows humor was rife among the grandees of European integration at the annual conference of the Friends of Europe think-tank on “the state of the union” last week. “Hopefully next year we won't be talking about Greek debt,” Etienne Davignon, 79, a Belgian former European Commissioner and patriarch of the European project, joked in his closing remarks. “Either it will have gone or we will have gone.” The opening session was billed as: “The EU's three ages: rise, decline and fall?” The question mark was the only concession to hope. Weary cynicism surrounds next Sunday's summit of the 27 EU leaders, their sixth attempt this year to draw a line under the euro zone crisis that has led to bailouts of Greece, Ireland and Portugal and is now singeing Italy and Spain. They trumpeted a “comprehensive response” back in March, but, due mainly to German caution, adopted a catalogue of half-measures described by British Prime Minister David Cameron last week as “a bit too little, a bit too late”. In July, with bond market contagion spreading for the first time to Italy, the euro zone's third biggest economy, leaders of the 17-nation single currency area agreed on a second bailout for Greece involving “voluntary” writedowns for private bondholders and more powers for their EFSF rescue fund. Traders quickly spotted that the accord would take months to implement and might be derailed in any of the 17 national parliaments that had to approve it, or by Greece's failure to achieve its fiscal targets. Spanish and Italian borrowing costs were driven so high that the European Central Bank had to intervene in emergency in August to buy those countries' bonds and force yields down. After weeks of bruising debate, first in the German then in the Slovak parliament, and haggling with Finland over its demand for collateral on Greek loans, the beefed-up 440-billion-euro European Financial Stability Facility is finally ready to act. But the goalposts have moved in the meantime. The situation has deteriorated and more radical action is now required. Greece has strayed off course again and doubts about whether it will ever be able to repay its debts have hardened as the country has slumped deeper into recession and public resistance to austerity measures has mounted. The talk now is of building a firewall around Greece and convincing investors that other euro zone sovereigns are safe, without another ghastly round of ratifications in member states. __
