A ‘New Deal’ for the euro: Escaping Europe’s Catch 22 (ekathimerini)

The situation in early 2012 looks better than it has for a while. The European Central Bank’s (ECB) intervention in the banking sector and positive developments in Italy have increased confidence in the markets that the EU might eventually be able to overcome the crisis. But while Italy and Spain are raising additional money at much more favorable rates, the downgrading of eurozone economies continues nonetheless. The situation remains very fragile and the future looks worrying, with the International Monetary Fund (IMF) recently warning of a potentially disastrous economic downturn in the eurozone.

Europeans are increasingly wondering what more they can do. So much has already been implemented: enhanced governance in the eurozone, an increasingly interventionist ECB, austerity and reform programs across the EU, significant support from stronger economies and the IMF to the weaker ones, repeated support to prop up Europe’s banking sector, and political change in most crisis countries. But nothing has proven to be enough to stop the crisis from resurfacing again and again.

There are more attempts to stop the crisis in the pipeline, including a permanent larger crisis mechanism earlier than previously scheduled, higher firepower for the IMF, negotiations for a deal with the private sector to reduce Greek debt, and a new fiscal compact enshrined in an intergovernmental treaty to enforce fiscal discipline, preparing the political ground for Germany to support additional efforts to overcome the crisis. Implementing all this will prove to be difficult, but even once all this is in place, will it be enough? … What is needed is a ‘New Deal’ for the euro…

Escaping Europe’s Catch 22 (ekathimerini)¬†

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