Morning Call: pick of the comment

The ten must-read pieces from this morning's papers.

1. The Tories will get burnt fighting fire with fire (Times)

Daniel Finkelstein says that negative campaigning could damage David Cameron's image with the voters. The media focus on the Tories is an opportunity, not a threat.

2. Can anyone explain what the Conservative Party stands for? (Daily Telegraph)

Simon Heffer is not impressed with the way Cameron has moved power of decision-making in the party to the centre. In the absence of the old, core right-wing policies, the Tories lack clarity and direction, and are haemorrhaging support to fringe parties.

3. Bashing the rich won't work for Obama. But other rallying cries might (Guardian)

Obama is shrewd not to inveigh against the bankers, says Michael Tomasky. It would be better to make his cause by reminding America of the good things that the government does, and who higher taxes will help.

4. Passport to the truth in Dubai remains secret (Independent)

Whoever killed the Hamas official in Dubai is still playing an old, dirty war, says Robert Fisk. Now we must look beneath the propaganda for the truth.

5. How to walk the fiscal tightrope that lies before us (Financial Times)

Martin Wolf warns that huge fiscal tightening could tip much of the world back into recession. We must make it one of our priorities to let the private sector heal.

6. Power to the people -- and trust them too (Times)

James Purnell and Jim Murphy renew calls for a radical Labour manifesto. The party has lost faith in its communal roots, they say, but the public can be trusted to make the right decisions.

7. Why is our anti-war outrage muted at this Afghan folly? (Guardian)

Even doubters seem to be giving the military intervention one last chance, says John Kampfner, but there is little confidence it will succeed.

8. The year China showed its claws (Financial Times)

David Shambaugh looks at what lies behind Beijing's new assertiveness. Is it a case of true colours showing, a display of nationalism in the run-up to a change of leadership, or a sign of confidence gained from the vindication of the Chinese development model?

9. The Bank of England is right to hold its nerve (Independent)

Inflation is proving sticky, but it is premature to tighten monetary policy, says the main leader.

10. Hostage to hot air (Guardian)

Isabel Hilton says that the climate debate in the United States is mired in political weakness and infighting, setting the tone for unconstructive global negotiations.

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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump