Let us fantasise that this festive quiet conceals dervish-like activity by euroland policy-makers
The week between Christmas and New Year, and all is quiet on the financial front. In markets as thin as these you could hear a Swiss franc drop (not that that's likely to happen, Switzerland being one of the few safe havens from the global turbulence). And from Europe's policymakers you will hear barely a peep.
But let's imagine otherwise. Let us fantasise that this festive quiet conceals dervish-like activity by euroland policymakers, gathered in Washington, under the watchful eye of Christine Lagarde from the IMF and Tim Geithner of the US treasury. Beijing, Tokyo and Delhi are on speed dial (David Cameron gets the occasional round-robin email). Because these elite minds surely know that the holidays are the ideal time to tie up a package of measures to be launched early on the first big day of trading. On Monday 2 January, as financiers are settling down in front of their Bloombergs they will be hit with a barrage of commitments and cash designed – and here we really are in the realms of the wishful – to save the euro. What would be inside such a bundle of policies?
First, it would have to be designed for immediate release. Any real cash would have to be ready from the get-go, not by the middle of the year subject to national cabinet approval, let alone for sometime in 2013 (the original plan for the European Stability Mechanism). Let it not be forgotten that at the start of February Italy's government has either to repay or to renew €28bn of loans – and no one has a clue how it is going to do so.
The need for speed will almost certainly mean Germany and others in northern Europe putting up more at the start; it probably also implies help from outside Europe, channelled through the IMF. That means sweeteners. Two obvious ones would be to do with the IMF and private-sector takeovers. First, Europe pledges to surrender a large part of its stake in the governance of the IMF – and that the next head of the Fund will be chosen in an open and fair manner. Reform of the IMF is long overdue, of course, and will probably only happen under duress – and the collapse of the currency of 17 European nations seems as good a pressure point as any. Second, the old world promises it will drop the sniffiness towards corporate takeovers from Asia. There will be no repeat of the scenes of Lakshmi Mittal buying Luxembourg's Arcelor in 2006. Then, the Indian was taunted by his target company for offering monnaie de singe (literally monkey's money) – with no rebuff from the Luxembourg government.
Our fantasy euro rescue would also have to be clear about where the backstop is. When investors buy bonds from Italy or Spain or a growing number of governments under financial distress, they have no idea whether they are guaranteed by the eurozone or not. That goes double for banks based in Milan or Madrid; whereas in Britain anyone dealing with a big bank knows that it has a government treasury sitting behind it. One obvious but near-impossible solution to this would be to have common European bonds issued from a eurozone treasury, with the countries with the best credit backing up those with the worst. Similarly, when dealing with a continent-wide banking system that looks insolvent in some places (Greece being the best example), our policymakers will have to come up with a common plan to take over bust banks and thoroughly stress-test others to show the world they are sound trading partners. Finally, there will need to be a series of long-range economic policies: an end to counterproductive austerity, a new mandate for the European Central Bank to encourage growth.
We could list more measures to hold the eurozone together. These are just a taster, yet it is already clear most of them would be quite beyond any policymakers attempting a last-ditch effort to save the euro. That gives some idea of the impossibility of the task, and the difficulties facing the continent in the new year.