Coupled with the Federal Reserve Bank’s Jeremy Lacker lamenting the “tepid” growth in the US, Monday’s business news offered a further retreat from the optimistic tone from the week-and-a-half ago euro zone summit in Brussels.
This week, finance ministers are again Brussels-bound for talks on the debt crisis and, specifically, for discussing how to implement the measures agreed upon at the summit. Bailing out the Spanish banking sector and addressing Greece’s ongoing — one might even say chronic — economic crisis are high on the agenda.
Greek Prime Minister Antonis Samaras won a vote of confidence held on Sunday by a wide margin. Samaras has been an advocate of keeping Greece in the euro zone while renegotiating the terms of the bailout.
This stance might be mostly wishful thinking. Finance minister Yannis Stournaras said last week that an official from one of Greece’s creditors warned he would face a “very tough time” at the Brussels meeting.
Then, around noon on Monday, Greece’s deputy labor minister Nikos Nikolopoulos resigned, apparently in protest about Samaras refusing to renegotiate changes to Greece’s labor laws with the troika, the European Commission, the European Central Bank and the International Monetary Fund.
Nikolopoulos’ resignation means that three ministers have bowed out since Samaras was sworn in on June 20. (The Guardian observes that the final days of former Prime Minister George Papandreou were also rife with defections.)
At the actual meeting, ECB President Mario Draghi spoke with characteristic reserve. With stocks in all the European exchanges falling and Spain’s 10-year bond yields heading into the “danger zone” (7.1 percent), Draghi, addressing the European Parliament, spoke of the need for structural reforms: first, a banking union, then fiscal union, then economic union, then political union.
Such a gradual — leisurely — response is is what Münchau’s twenty years of euro zone crisis prediction was referring to.
The problem, explains Ian Traynor in the Guardian, is that euro zone governments are (already) pulling out of the pledges they made at the summit to put euro zone bailout funds directly into struggling banks (i.e., Spain’s) without adding to governments’ debt burdens. Germany and some other northern European (Finland) nations are saying in effect, not so fast with the bank recapitalization.
All this is why the euro zone debt crisis seems ever more likely to linger on for twenty years.
Just after my posting this, euro zone ministers agreed to a 30 billion euro bailout for Spain’s banks.
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Photo by Eoghan OLionnain