Bloomberg
December 9, 2011
On Feb. 15, 1999, Alan Greenspan, Robert Rubin and Larry Summers were featured on the cover of Time magazine as “The Committee to Save the World.”
Greenspan, then Federal Reserve chairman, and Rubin, the Treasury secretary, were smiling. And why not? This “free-market Politburo on economic matters,” as Time described the troika, had steered the U.S. economy through the Asian financial crisis in 1997 and Russia’s default and the near-collapse of hedge fund Long-Term Capital Management in 1998 seemingly unscathed.
Now it’s Angela Merkel’s and Nicolas Sarkozy’s turn. Earlier this week, the chancellor of Germany and the president of France laid the groundwork for today’s European Union Summit to Save the Euro, the fifth such gathering in 19 months, by agreeing to greater central control over individual countries’ budgets. This will entail amending European Union treaties -- subject to approval by the legislatures of all 27 countries, not just their executives meeting now in Brussels. In some countries, it may require a referendum, which is every politician’s worst nightmare.
No wonder some analysts are skeptical that the summit can succeed where previous ones have failed.
“These plans for fiscal union may be part of the process for avoiding the next fiscal crisis in Euroland, but they do nothing to address the current one,” says Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York. “It’s a prenuptial agreement.”
It may not have the authority of a prenup. Haven’t we seen this movie before, at least the trailer? It was called the Stability and Growth Pact.
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