Like America’s dream of unending boom and the reckless creation of an entitlement society, Ireland, Greece, Portugal, and Spain have been seeing their economies totter. Greece suffered riots again. And Ireland this month finally was forced to accept an EU-IMF (International Monetary Fund) bailout for its banking industry. Moody’s investment Service cautioned Dec. 15 that it is reviewing Spain’s economy with the prospect of downgrading its bond rating again.
At the summit in Brussels, a closing communiqué said:
The heads of state or government of the euro area and the European Union institutions have made it clear that they stand ready to do whatever is required to ensure the stability of the euro area as a whole. The euro is and will remain a central part of European integration.
Junker’s e-bonds idea was shoved down the road of the future. But, according to The Washington Post story, he “insisted it would return to the fore later.” Also put off was a suggestion from the International Monetary Fund’s managing director, Dominique Strauss-Kahn, to stop dealing with the crisis county by country” and inject more money into the emergency fund to bolster confidence until the permanent fund, the European Stability Mechanism, can be set up in two years.
The European Council president, Herman Van Rompuy, said the European Union was making itself “crisis proof” and, the Post story reported, “there was said to be no need for an increase” in resources for the emergency fund, the European Financial Stability Facility. Van Rompuy maintained that only 4 percent of the fund had been used, so plenty of money remains if another country gets caught in a financial vice. He said if the problem arises, “we will do whatever is necessary.” With Greece, Portugal and Spain under financial stress, his words had the ring of bravado.
The permanent rescue fund has been agreed upon in principal. But there’s no decision as to how much each country will put up or the conditions for loan granting. Germany’s Merkel pushed for tough criteria, arguing that Germans are sick of paying for fiscal legerdemain in other EU countries.
Long negotiations still loom over the questions over how much funding and the conditions under which loans will be granted. Nicola Vernon, an economic analyst with the Bruegel research institute in Brussells, commented “I think it’s normal that the euro crisis is difficult to deal with. The European Union has always put the cart before the horse.”
Because there is no federal European government, there is no way for the EU to create an overall tax policy or budget. Each EU nation is sovereign and stuck with its own political dynamics. Therein surely lies the EU impotence and today’s euro’s crisis.
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