Friday, June 29, 2012

The Latest Euro Summit...

Cutting to the chase: will the measures adopted by the Eurogroup solve the European drama or not?

Frankly, I have my doubts. The BBC's Paul Mason doesn't seem to believe it will do the job, either; although (like me) he admits it contains some good things:
"The summer of crisis, collapse and political disorientation is cancelled.
"Last night the EU leaders took steps which, though not a complete solution to the crisis, averted its escalation. Crucially Angela Merkel did what she had insisted was impossible".
(See here)
From where I am standing, the best thing is that, against my suspicions, it appears that the recent Spanish bank bailout will not increase the Spanish public debt, and, therefore, will not imply an additional austerity package. If this is really so, I can say that I am relieved to be mistaken.

Another good thing is that, as the Irish case is similar to the Spanish one, the same treatment should be made extensible to Ireland, which had to apply austerity measures, even though the bailout money was destined to Irish banks.

Unfortunately, the same treatment does not benefit Portugal or Greece, as the object of their bailouts was the public sector.

It also appears that the European governments lending money to the Spanish banks will not claim seniority over the bailed out banks' assets. This should keep our dear-beloved "investors" happy, for a while.

From a political perspective, it looks like European summits without Monsieur Sarkosy won't be that much fun for Frau Merkel.

The bad thing is that the amount dedicated to fiscal stimulus is pathetically insufficient (see here). Without stimulus, I can't see how these economies will grow.


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