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France Rejects Sarkozy and Austerity

In May, French voters elect Socialist François Hollande (WSJ) as the new president of France, rejecting, at least rhetorically, Nicolas Sarkozy and his pro-austerity--and pro-German--approach to the eurozone crisis. Hollande vows to challenge German Chancellor Angela Merkel by shifting the policy discourse away from budget cuts and implementing a so-called growth pact. Nonetheless, Hollande is forced to adopt austerity policies and the fiscal compact, while conceding the significant economic challenges confronting France.

Greeks Vote to Stay in the Euro

Greece's center-right New Democracy party wins (CNN) the most votes in a second round of parliamentary elections in June. The victory ensures the country's commitment to EU bailout plans and austerity measures, and staves off a Greek exit from eurozone. The elections come on the heels of a first round of voting in May that yielded significant gains for fringe, anti-austerity parties, calling into question Greece's future in the single currency union. The vote is considered a public endorsement of Greece's EU membership, reassuring markets and political leaders of the country's commitment to the single currency.

Spain Requests Bank Bailout

In June, the Spanish government officially requests "up to a maximum" of $122 billion in EU funds to recapitalize its ailing banks (DerSpiegel) and provide a buffer of capital to prevent future crises. By September, Spanish Prime Minister Mariano Rajoy implements a fresh round of austerity measures amid growing fears the country may need to request a full government bailout from the EU. Meanwhile, the EU approves $48 billion (WSJ) in funds for the Spanish bank rescue in late November. The move signals a widening of the eurozone crisis from one centered on sovereign debt to one with a banking crisis component.

EU Officials Propose a Banking Union

At the end of June, EU leaders introduce plans to create a so-called banking union that would provide a centralized regulatory framework for the eurozone's large banks. In July, EU officials move forward on plans for establishing a banking supervisor that would be situated in the European Central Bank (WSJ). The single EU banking authority would potentially be able to activate the permanent EU rescue fund in order to directly recapitalize struggling eurozone banks, such as those in Spain. The plan is the latest EU initiative to centralize control over eurozone finances while reducing the power of national governments, but raises questions about the role of the ECB and whether it is acquiring too much power without a democratic mandate. However, in mid-December, EU finance ministers officially agree to a deal to create a single banking supervisor (WSJ) within the ECB that will monitor at least one hundred and fifty of the eurozone's biggest banks and those in other EU countries that choose to participate, the first concrete step toward establishing a banking union.


Date: 2015-12-11; view: 775


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