A flawed attempt to take control

European Commission President José Manuel Barroso’s letter to eurozone leaders, made public on 4 August, admitted that the “bold decisions” taken on 21 July had not, after all, had their “intended effect on the markets”. 

He declared that the sovereign-debt crisis was no longer confined to Greece, Ireland and Portugal. Frustrated that national parliaments had taken their annual breaks just after the summit, he called on them to “rapidly approve” the changes to the European Financial Stability Facility “to address the current contagion”.

Criticism

What was most startling, however, was his suggestion that the decisions taken at the summit to increase the flexibility of the fund were not sufficient, criticising the agreement for being too complex and incomplete. Then he chastised leaders for doing exactly what he was doing himself: “undisciplined communication”. It was a calculated political gamble to try to wrest back some control of the situation.

Alarmed at the apparent undermining of the summit agreements, the markets went into a tailspin, and Olli Rehn, the European commissioner for economic and monetary affairs, had to cut short his holiday to douse the flames. The gamble had not worked.