The European Union summit held last week in Brussels resulted in three main policy changes to the current crisis. Most important, bailout fund monies can be used to recapitalize banks directly, rather than via governments. This was meant to reduce the so-called “vicious circle” of debt between governments and banks.
The market’s reaction was significant on Friday, with most exchanges gaining nearly 3% on the news. But is this really enough to change the tide of the region’s fiscal woes?
That is doubtful. I’ve spent the last few weeks (please see our four-part blog series on the EU) discussing how the only real, permanent solution involves Germany making significant concessions, including shared risks on further debt obligations (i.e., Eurobonds). Nothing else will really change the fundamental challenges facing the troubled eurozone.
One of the better articles I’ve seen on the crisis thus far can be found in The New York Times. I look forward to decisions that are meant less to make headlines than about real and lasting solutions to the euro crisis.
See all the blogs in our multipart series on the eurozone crisis.