Europe: Sputtering toward oblivion
By Cyrus Sanati
July 2, 2012
European leaders continue to apply flimsy Band-Aids to their gushing economic wounds in an effort to avoid making the hard decisions necessary to save the euro from oblivion. The 19th “emergency” EU summit to be called since the European debt crisis began over two years ago concluded on Friday with yet another sputtering salvo of stop-gap measures and shaky promises. There was little, if any, talk of tackling the structural problems behind the crisis, with leaders still at odds over how they will philosophically go about solving the issue.
Kicking the can down the road to buy some time may have sufficed at, say, the third or fourth summit, but doing so this deep in the crisis is simply inappropriate. While markets may rally in the short-term, they won’t be back to normal until it is certain that Europe is on the right track.
The resolutions reached at the conference Friday centered primarily on preventing Spain, and to a certain extent, Italy, from needing a potentially disastrous sovereign bailout. The belief was that if either of the two countries even whispered the words “default” or “haircut” then the euro could come crashing down as investor confidence dried up. To avoid such an outcome, EU leaders made a few sizable tweaks to some of the bailout rules they had just months ago painstakingly hashed out with one another at one of the various other “emergency” summits.