July 21, 2011
Europe as a project tends to lurch forward through crises. That’s been unnerving for investors and markets as one eleventh hour follows another in the saga of the sovereign-debt crisis ensnaring Greece, Ireland and Portugal. Ahead of this week’s emergency summit, nerves were certainly jangled, as the crisis that has flared up over Greece’s need for a second bail-out threatened to spread to the much bigger economies of Italy and Spain with their ten-year government bond yields soaring to euro-era highs. Expectations of a breakthrough in the impasse over how Europe should respond were low, not least since Angela Merkel, the German chancellor and the euro area’s reluctant paymaster, had sought to dampen them.
Maybe that was all masterly stage-management because the summit cheered up markets even before the "i"s had been dotted and "t"s crossed on the final communiqué. A draft statement circulating on Thursday afternoon, even as the 17 euro-area leaders were meeting, had already started to quell the darkest fears, spurring a relief rally. The final communiqué spelt out a package that did rather more than had been expected.
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