Doubts mount as Europe struggles with next steps in euro crisis
European stocks as well as the euro dropped as optimism from last week's euro crisis summit yielded to tough questions about the EU's ability to avert fresh crises.
(Page 2 of 3)
French Socialist presidential candidate François Hollande says the fiscal union concept agreed to last Friday by 26 EU members – Britain did not join in – to tighten fiscal discipline, lacks a significant growth component, and vowed to renegotiate it if elected next spring.Skip to next paragraph
Subscribe Today to the Monitor
Last Friday’s treaty was hailed as a kind of landmark and a triumph for German Chancellor Angela Merkel. The deal represents a greater institutional effort to force budgetary oversight on eurozone members to hew to targets agreed to years ago in the Maastricht Treaty, a founding treaty of the European Union, impose sanctions on violators, and mend complex institutional flaws. A permanent “stability fund” to be capped at €500 billion will come online a year early. The new treaty rules essentially create “more Europe” as Ms. Merkel puts it, albeit a more German-influenced Europe, and will theoretically avert new crises.
Yet whether European leaders have thwarted the immediate crisis on their doorstep is the question.
The Dec. 9 summit was only the most recent in two years of summits that have been criticized as offering too little and too late, creating uncertainty about Europe's resolve in markets and causing frenzied attacks on Irish and Portuguese bonds that eventually forced those countries into bailouts. The crisis was spawned by a huge Greek debt first revealed in December 2009.
Holiday season tempers aggressive action
December has always been a slower month in Europe, with many executives hitting the ski slopes, and the holiday season has often acted as its own kind of "firewall" from aggressive market action.
But markets will gear up again next January. An editorial in Germany’s Spiegel newsmagazine this week suggested that markets “are only interested in the question of how the firepower of the euro backstop fund can be boosted and what role the European Central Bank will play in combating the crisis. On this front, European leaders have made little progress.”
Already, whether an estimated €200 billion agreed to in the treaty summit to help prevent an Italian or Spanish default can be funneled through the International Monetary Fund is unclear, with Czech and German officials balking and US and Japanese officials questioning the approach of using the IMF for such dedicated funds, according to the news site EUobserver.com.
Different views of what it means to be European
As the euro crisis has unfolded it has also deepened a long running existential question over what it means to be European, and what model the EU will run under.