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Eurozone crisis: The five most significant moments of 2012

Thursday 27 December 2012

1. Mario Draghi says he'll do “whatever it takes” to preserve the euro, “and believe me, it will be enough”

The speech by the president of the European Central Bank in London on 26 July – and subsequent actions that indicated that he would be true to his words – did more than anything to stabilise the euro in the second half of the year. Draghi sent shockwaves throughout the eurozone with this dramatic statement – about which, he says, he did not warn European leaders – but it seemed to galvanise them just as fears were growing that the summer recess could see a repeat of 2011's meltdown.

Soon Draghi announced his OMT (outright monetary transactions) programme – a commitment to buy sovereign bonds in unlimited amounts – and even though it hasn't been used (yet) it has reduced market turmoil considerably. Sceptics warn that it is no more than a sticking plaster over a gaping wound but if it has done nothing more than buy time while leaders implement longer-term solutions, it must be judged a success.


2. Spring election nights

On the same day in May voters went to the polls in two eurozone countries. The outcome of both changed the eurozone.

First, François Hollande ousted Nicolas Sarkozy as France's president. While Hollande came to power promising to fight for an EU growth pact and rapidly casting off the cosy ‘Merkozy' alliance of his predecessor by involving – shock, horror – the leaders of Spain and Italy in crisis-response discussions, the reality has been rather different. Hollande's election has served to weaken France's hand rather than strengthen it. He has not managed to broaden the eurozone's powerbase but instead appears to have given Merkel room to take the lead on her own, as demonstrated in subsequent European Councils and negotiations over the banking union.  

In Greece, meanwhile, the election proved less decisive and weeks of wrangling and further elections ensued, while all the time appearing to propel Greece towards a eurozone exit and civil unrest. But worst fears were unfounded and mainstream Greek parties managed to form a coalition behind Antonis Samaras. It hasn't all been plain-sailing but Samaras has been able to push major austerity and economic reform laws through parliament and, eventually, secure Greece's bail-out instalment from the rest of the eurozone. His handling of the situation means that Greece is no longer staring at the abyss. Her eurozone colleagues now seem comfortable with the country remaining on the inside.


3. June's European Council

This was the high-stakes summit that saw Germany make significant concessions to allow direct recapitalisation of banks to bypass governments and to enable the eurozone's rescue fund to buy government bonds. In the immediate aftermath it looked as though Angela Merkel, the German chancellor, had suffered a defeat but in reality she had succeeded in shaping the direction of the crisis response throughout the rest of 2012 and beyond: banking supervision, a roadmap to deeper eurozone integration and the end to any serious discussion about eurobonds.


4. Banking supervision

Against many expectations, leaders in December agreed to give the ECB the task of supervising all banks in the eurozone. While this alone will not solve the eurozone crisis, it does represent a significant shift of sovereignty away from national capitals and paves the way for future developments such direct bank recapitalisations and common deposit guarantee and bank resolution schemes. Expect these to lead the debate in 2013.


5. Mario Monti resigns

The eurozone was more stable in 2012 than in 2011 in no small part because Silvio Berlusconi had been replaced as Italian PM by friend-of-the-EU Monti for 13 months. It's perhaps easy to forget now but in November 2011 it looked as though the Italian economy was about to implode, taking much of the eurozone with it. That this did not happen owes much to Monti's skills. But without him, what now? He resigned in December. He may well return. But so too could Berlusconi. Monti's departure could be as significant for the eurozone in 2013 as anything else.  


Did I miss anything? Would you have chosen different events? Let me know below.


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