Les grandes vacances and the financial crisis

As the European policy elite prepares for their normal practice of taking August off — because, after all, nothing big ever happens in August or September that you’d need to be ready for — there are conflicting messages about whether this is actually a good idea.  First, a nice quote via a Reuters story arguing that it helped when everyone decamped from their offices last year:

“Last summer, the crisis cooled partly because euro zone politicians went to the beaches and stopped contradicting each other in public every day,” one senior EU official involved in the Greek rescue negotiations said. “That moment can’t come soon enough this year.”

On the other hand, we’re coming up on the 1 year anniversary of the disastrous absence of Official Ireland from its desk (on what was actually a July-September inclusive getaway for the then-government), a problem later noted by outgoing ECB board member Lorenzo Bini Smaghi

Whereas [PM Brian] Cowen and his ministers had responded swiftly during 2009 as fiscal conditions worsened, Bini Smaghi says there was no comparable action to reassure markets when the heat came on last year. Ireland was listing from the summer, its position worsening all the time as investors took fright.

“Markets waited and waited and since they saw no policy reactions they started to lose confidence in the course of the summer. Remember there was a downgrade – in August – but there was no policy reaction, no announcement that a tough budget was in preparation and no announcement of the measures. The loss of confidence also affected the banking system and this created a spiral which led to the crisis and in the end the request for financial assistance.”

Splitting the difference between these positions is currency strategist Stephen Jen

With signs of anxiety resurfacing late Friday — a rally by Spanish bonds fizzled at the market’s close — the idea that investors would wait patiently for two months for Europe’s leaders to provide the fine print on their grand proposal was met with disbelief in some quarters.  “I would suggest that if the eurocrats want to go on vacation that they bring their cellphones,” added Mr. Jen.

Back when Nicolas Sarkozy was popular, one of his catchy slogans for reaching target voters was “the France that wakes up early.”  Could we get a similar chic in Brussels, Frankfurt, and the national capitals around “the Europe that works during August?”

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