Bloomberg
December 7, 2011
Financial markets will make an instant judgment on this week’s summit of European Union leaders, and it had better be favorable.
If the meeting stifles the recent panic and Europe’s bond yields subside, well and good. If the leaders keep vacillating or if the talks break down, the catastrophe that markets have been fearing for months could be upon us.
Those are the stakes in the first instance. Let’s suppose the best plausible case -- the one that markets seem to anticipate. The leaders announce new commitments to fiscal restraint combined with new arrangements for collective fiscal defense. The European Central Bank pronounces itself impressed and moves to backstop distressed public debt. This buys time and staves off disaster.
Yet this would leave vitally important questions about Europe’s future unanswered or even unaddressed. The depth of the crisis and the ineptitude of the EU’s collective leadership -- if one can call it “leadership” -- have conflated three distinct issues. Keep each separately in mind when asking, “Is this deal of any use?”
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