Crisis summit after crisis summit - and still Europe's political leaders have yet to meaningfully calm the markets. Perhaps their strong words and handful of measures mollified investors for a few weeks or days, but that's as far as it goes.
The European Financial Stability Facility (EFSF) needs to be expanded - many cite the figure at 1 trillion Euros. The solution also requires more bond-buying by the European Central Bank. Investors are even hoping for mutually guaranteed Eurobonds.
Europe's leaders have not provided this so far. The big problem they face in solving this economic crisis is a political one. Most governments do not have a mandate from voters to implement such drastic measures. German voters, in particular, are very hostile towards further bail-outs and fiscal transfers to weaker euro-zone countries. This is opposed on two grounds. Firstly, put simply, they are not prepared to make such a sacrifice for profilgate countries. Secondly, the solution constitutes a step towards greater political union - stronger countries providing support for the weaker ones.
To tie Angela Merkel's hand further is her coaltion partners. They are reluctant to expand the EFST's powers and let it buy up government debt. Further, Germany's constitutional court may rule that euro-zone bailouts are illegal.
The political leaders of Europe are admittedly in a difficult situation. But the choice is clear. They need to explain to the electorate that the sacrifices they have to make are a necessary evil. The alternative is worse - even more economic turmoil and possibly even the split of the EU.
The European Financial Stability Facility (EFSF) needs to be expanded - many cite the figure at 1 trillion Euros. The solution also requires more bond-buying by the European Central Bank. Investors are even hoping for mutually guaranteed Eurobonds.
Europe's leaders have not provided this so far. The big problem they face in solving this economic crisis is a political one. Most governments do not have a mandate from voters to implement such drastic measures. German voters, in particular, are very hostile towards further bail-outs and fiscal transfers to weaker euro-zone countries. This is opposed on two grounds. Firstly, put simply, they are not prepared to make such a sacrifice for profilgate countries. Secondly, the solution constitutes a step towards greater political union - stronger countries providing support for the weaker ones.
To tie Angela Merkel's hand further is her coaltion partners. They are reluctant to expand the EFST's powers and let it buy up government debt. Further, Germany's constitutional court may rule that euro-zone bailouts are illegal.
The political leaders of Europe are admittedly in a difficult situation. But the choice is clear. They need to explain to the electorate that the sacrifices they have to make are a necessary evil. The alternative is worse - even more economic turmoil and possibly even the split of the EU.
No comments:
Post a Comment