October 22, 2011
The world's hopes that Europe will resolve its debt crisis in a bold stroke are running into a stubborn reality: Solutions that work on paper are often unattainable in a euro zone of 17 sovereign countries.
Euro-zone finance ministers met in Brussels Friday, ahead of a European Union summit on Sunday, to grapple with the disagreements that are holding up the promised "comprehensive package" to tame the crisis. Those include rifts between the most important players—Germany, France and the European Central Bank—over how to beef up the euro zone's bailout fund and how deeply to restructure Greece's crushing debts.
Even if leaders do enough to avoid a financial meltdown, resolving the deeper causes of the debt crisis—which include economic disparities that Europe hasn't figured out how to redress within the euro framework—is likely to take years, analysts and officials warn.
"Europe is staring at a lost decade," says Simon Tilford, chief economist at the Center for European Reform, a London think tank. Years of economic stagnation with persistent fears of sovereign and banking-sector defaults "will have a considerable impact on the broader international economy," he says.
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