Europe digs ever deeper debt hole

Europe is digging an ever-deeper hole as it vows to resolve the eurozone crisis, experts said on  Sunday as Greece readies for a pivotal week of international debt diplomacy. "The otherwise fractious European Union leaders have united in their criticism of the markets, the IMF and now (US Treasury Secretary) Tim Geithner -- for being honest about the scale of problems facing the eurozone," Sony Kapoor, head of the Re-define think tank, told AFP. En route to New York and a frantic week at International Monetary Fund, World Bank and G20 gatherings, he said "kill the messenger seems to be the new strategy" for an EU "plagued by parochialism, pettiness and procrastination." "This does not bode well for the ability of EU leaders to respond to the big and urgent challenge posed by the unsustainable borrowing costs facing Italy," the eurozone's third economy, he said. Geithner had warned when in Wroclaw, Poland, on Friday for talks among EU finance ministers that Europe's "governments and central banks need to take out the catastrophic risk to markets." In an eloquent put-down, European Central Bank chief Jean-Claude Trichet on Saturday said he didn't quite understand precisely what that "catastrophic risk" was. The key figure so far in bond-buying interventions that prevented Italy's borrowing costs from hitting the levels that triggered bailouts for Greece, Ireland and Portugal, Trichet was adamant the 17-nation eurozone could be more upbeat about its overall debt burden. He said that "taken as a whole, it is probably better than other major advanced economies." As pointed out by German Finance Minister Wolfgang Schaeuble and others, the United States is in a far worse position, both in terms of its annual deficit -- tipped at 8.8 percent this year, as against Trichet's 4.5 percent -- and its legendary runaway national debts. Former French forein minister Michel Barnier quipped that the EU could perhaps invite China's finance minister as its headline guest next time out. The defiant stand towards Geithner came after eurozone ministers delayed a decision on when to release blocked bailout loans for Greece, as leaders press for ratification of changes to wider rescue funding. Boston University's Vivien Schmidt has her suspicions that with just five of the 17 having ratified a deal struck in July that also includes a second bailout for Greece, the discussion of a tax on financial transactions was really "a smokescreen." Likewise, she asks, are ministers not placing their faith in Brazil, Russia, India, China and South Africa to "come to the rescue of the PIIGS," Portugal, Italy, Ireland, Greece and Spain? The BRICS group said they would meet on the sidelines of the IMF talks to discuss buying eurozone bonds. Eventually, Schmidt believes, the eurozone "will take the big leap" towards "e-bonds and common fiscal policy, which is the only answer to the crisis," but the question is when. There was some progress in discussions in Poland about recapitalisation of Europe's banks, as long championed by Sweden's Anders Borg, and Spain's Elena Salgado said more "robust" stress tests on banks were also needed. But French analyst Marc Touati of Assya Compagnie says European leaders have had endless opportunities to bring public finances and national economic disparities into line. "This crisis is the result of a decade of political errors by European leaders who failed to make the eurozone a high growth zone, to reduce debt and deficits or harmonise taxes or the labour market," said Touati.