The euro zone continues to struggle with a major financial crisis. Essentially, vastly different levels of competitiveness within a single currency zone cannot be sustained unless there are constant transfers of wealth from the strongest to the weakest. While leaders of the G8 called for Greece's continuing with the euro, Germany is the key and Germany's tolerance for supporting Greece seems to be nearing its political limits. Greece will hold another election on June 17 and if the result favours a rejection of the previously agreed austerity package, all bets are off and Greece may have to exit the euro.
The election of President Hollande in France will not bring about drastic change in handling the crisis, rather it will focus the debate within the euro zone on measures to stimulate growth and employment. Most leaders are now speaking both of fiscal consolidation and growth. Especially troubling, however, is the situation in Spain, a large economy deeply in recession, with youth unemployment at a staggering 50 percent and some banks in trouble.
So clearly Europe needs growth and enhanced international trade is one potential source of such growth. Hence, in the midst of all this turmoil, the Europeans still place a high priority on completing the Canada - EU trade negotiations this year. Europe sees Canada as a stable and prosperous place in which to do business. The strongest and most competitive European countries (notably Germany) stand to gain the most from an agreement with Canada.
For Canada, while a deal with a troubled Europe might seem at first glance less appealing than it once did, the Harper government is absolutely determined to conclude an agreement, preferably by the end of 2012. It sees this deal as an important strategic and political goal. The provinces are, for the most part, onside and negotiations are in their...