July 09 - Euro zone finance ministers met on Monday to flesh out the details of a possible European banking union, but analysts remain skeptical of European leaders' policy of apparently muddling through each new crisis, as Joel Flynn reports.
Tacit relief on Monday morning as Greece's new conservative-led government won parliamentary approval. But, as many have come to expect with the current euro zone crisis, a step forward was seemingly followed by two back. Hours after the announcement, Greece's deputy labour minister announced his resignation, just as reports surfaced that Greece's economy will shrink a deeper-than-expected 6.9 percent this year. The country's finance minister hopes to renegotiate some elements of the country's bailout. But ING's Rob Carnell says now is not the time to agree to a haircut on Greek debt. (SOUNDBITE) (English) ING INTERNATIONAL ECONOMIST, ROB CARNELL, SAYING: "I think at the moment it's exactly the wrong time to be taking any additional pain and the people that actually own most of the Greek bonds right now are the ECB -- the private sector has really walked away from that entirely so that will have to be an official sector initiative and I think we're way off that. That's the only inevitability I see in terms of Greece." Monday's meeting of finance ministers was a chance to flesh out the details of last month's leaders' summit. Euro zone policy makers' hope to agree a common banking union overseen by the ECB. But with Spanish and Italian government debt prices surging back to unsustainable levels, hopes of real progress were fading. Tom Vosa from NAB says no-one is prepared to admit the true cost of the euro zone falling apart. (SOUNDBITE) (English) NAB GROUP HEAD OF MARKET ECONOMICS, TOM VOSA, SAYING: "There is no easy solution to this, so we'll carry struggling on, but of course people trying to pretend really to their tax payers that whatever the programmes are, they won't be involved themselves, and I think it's really a political failure within the euro zone, it's not an economic failure." Ahead of the meeting ECB President Mario Draghi called on governments to fully implement promised economic reforms. (SOUNDBITE) (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "Effective crisis resolution needs bold actions by central banks, but it also needs bold actions by other policy makers, notably governments." No significant new proposals are expected from this latest meeting. And signs are now growing that Europe's economic and monetary union may be fragmenting faster than policy makers can repair it. Joel Flynn, Reuters.