Friday, September 30, 2011

More of the Same Won’t Save Europe

New York Times
September 29, 2011

The German Parliament’s move to expand the euro-zone bailout fund on Thursday is welcome, but the European debt crisis is no closer to resolution than it was two months ago. Even with Germany’s roughly $287 billion increased contribution, the fund is still too small to provide more than a few days of calm to jittery markets.

The big picture, in fact, has gotten much worse. Greece’s indebtedness is growing, European bank balance sheets are shakier and investors are increasingly skeptical that Europe has the will to stabilize shaky credit and stock markets. Also conspicuously lacking is any clear plan for generating the economic growth needed to begin paying down those growing debts.

Instead, heavily indebted nations are yielding to pressure to embrace more of the austerity medicine that will only make them sicker. On Tuesday, Greece voted to impose a steep new property tax. On Wednesday, the European Parliament tightened the noose by approving new financial penalties for countries running high deficits.


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