Time to shift out of crisis mode, Europe
Tomorrow, Dutch elections and the German Constitutional Court's decision on the eurozone bailout fund have the potential to shake up the plan for Europe's debt crisis – again. Europe must shift away from piecemeal, stopgap measures and set the framework for a true banking union.
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On Wednesday, the Netherlands is expected to elect a new government, likely to be more critical of the European approach to the continent’s sovereign-debt crisis. Also on Wednesday, the German Constitutional Court is set to decide on the constitutionality of the European Stability Mechanism – the eurozone’s new permanent bailout fund and fiscal compact. And in October, the so-called troika of EU officials – the European Central Bank, European Commission, and the International Monetary Fund – will assess the progress made in Greece and decide on the next tranche of support funds.
All of this will then culminate in a European Union summit in the middle of October that could prove decisive in addressing Europe’s crisis.
Separately, these events are unlikely to derail the euro-crisis resolution plan centered on incremental steps toward further integration. A new Dutch government, like the new French government before it, is not likely to instantly alter the European course. Most observers also believe that the highest German court will approve the permanent European Safety Mechanism, if potentially with new conditions. And while the EU troika could deny Greece further funding, this seems improbable.
Taken together, however, these developments highlight the dangers inherent in the slow-paced, piecemeal approach to solving the eurozone’s woes. The problem with the current approach to European crisis resolution is that it requires time and overall, ongoing stability and thus relies on a number of pieces falling into place. If those pieces don't fall into place, the approach falters.
Of course, by now the end of the eurozone has been predicted countless times. On occasion, according to those assessments, the monetary union had merely months to live, or only days remained to implement the one big solution to end the crisis. None of these doomsday scenarios have yet to play out, and so far, potentially disruptive events, like the first round of Greek elections in the spring, did not turn out to be major obstacles. But European policymakers would be unwise to disregard the continued potential for and effect of high-impact events.