These are all significant steps and may, if adopted in the months — or years — to come, lead to a more balanced and stable European Union.
But amid all the talk of fundamental changes to the single-currency bloc, and the splendid (or squalid) isolation of the U.K., there was very little about how to bring down the high borrowing costs of Italy, Spain, France and the euro zone’s other members in the short term. In other words, the summit failed to propose an immediate solution to the euro zone’s sovereign-debt crisis.
Markets already sense this. Italian bond yields rose Friday after falling earlier in the week.
During negotiations Thursday night, Germany managed to quash any talk of any issuance of common debt by EU members, of allowing the ECB to assume a lender-of-last-resort role, and of other steps such as issuing the permanent bailout fund a banking license to help it combat the crisis.
Instead, the EU leaders have punted back to the ECB and appear to be counting on the central bank’s new leader, Mario Draghi, to save them. But Draghi has made it clear he intends to stick closely to both the letter and the spirit of the law that governs the ECB’s actions, so it’s not obvious what steps he will be willing or able to take beyond those he already has.
Those steps, which include lowering interest rates, easing collateral rules for banks and buying discreet quantities of government debt while making sure those purchases don’t increase the money supply, have done much to keep bond-market speculators from forcing a euro-zone nation to default. But it’s far from clear that after the most recent EU summit they will be enough to convince those speculators to give up their bully-boy tactics.
So while the EU’s leaders head home to trumpet their successes, defend their compromises and catch up on some sleep, the rest of us are left to warily watch markets and wonder whether another “make or break” EU summit is in our future.
