BloombergEditorial
December 8, 2011
If it seems as though the past week’s events in Europe are unfolding like a well-choreographed dance ahead of a two-day summit starting today, they are.
European Central Bank President Mario Draghi called the tune by hinting on Dec. 1 that he might do more to fight Europe’s sovereign-debt crisis if the euro area agreed to a new fiscal compact. Within days, Italy’s Cabinet, led by Mario Monti, the new technocratic prime minister, proposed painful budget cuts to tame the country’s debt. The next day, the German and French leaders, in a trademark pas de deux, agreed on strict procedures to deal with fiscal sinners that all 17 members of the currency bloc would have to adopt. Yesterday, officials discussed how to beef up a rescue fund that would spring into action in 2012, a year earlier than planned. Even the ECB is widely expected to cut interest rates today.
By the time the heads of state depart Brussels tomorrow, they hope to have agreement, at least among the currency bloc’s leaders, on measures aimed at convincing baying markets that the debt crisis is finally under control. Their latest plan will probably include a closer fiscal union overseen by a supranational body of technocrats and automatic sanctions for countries that breach the rules -- annual deficits below 3 percent of gross domestic product and total debt below 60 percent of GDP. Draghi, we hope, will cap it all off by making good on his quid pro quo offer with central bank bond purchases or guarantees.
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