New York Times
Editorial
December 9, 2011
We’re losing count of how many European Union summit meetings have ended with “historic” agreements to contain the euro-zone debt crisis only to see them fall apart as markets judged they were inadequate or irrelevant to the problem of making good on old debts and generating enough growth to pay off future obligations.
We are not optimistic that Friday morning’s agreement on a “new fiscal compact” for the euro-zone will now break that cycle.
The agreement — all 17 members that use the euro have agreed to sign it — is built around Germany’s demand for legal commitments to maintain fiscal and financial discipline. In the long-term, more discipline and coordination and more financial transparency are good things. But a pact that binds all members to more austerity in a time of recession is exactly what Europe does not need right now. The agreement will also increase the money available for future bailouts. But the amounts are still far too small to persuade investors that Europe is prepared to back up much larger economies like Italy and Spain. And it still leaves the euro zone without a lender of last resort, like America’s Federal Reserve, to defend vulnerable countries and banks from market panic.
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