Wednesday, February 1, 2012

Making It Worse in Europe

New York Times
January 31, 2012

European Union leaders failed on Monday to move forward on their most urgent task: increasing the bailout fund to protect Europe’s ailing economies from defaulting on their bonds.

Instead, leaders of 25 of 27 European countries agreed to sign a new fiscal compact that will legally restrict them from fighting recessions with robust fiscal stimulus. Most economists outside the euro zone consider this approach a dangerous one. Those countries account for more than 20 percent of the world’s economy. Condemning them to longer and deeper recessions will drag down economies elsewhere that depend on trade, from the United States to China.

Without a bigger bailout fund, investors will likely keep betting against weakened economies like Italy and Spain, pushing up their interest costs and, consequently, adding to their deficits. Nevertheless, Europe’s leaders deferred action on more money until March. Market speculators may not agree to wait.


See also

No comments: