Craig Eisele on …..

February 1, 2012

EU Leaders FAIL in Truly Helping the Situation in Europe

Filed under: Uncategorized — Mr. Craig @ 7:18 pm

Making It Worse in Europe

European Union leaders failed on Monday to move forward on their most urgent task: increasing the bailout fund to protect Europe’s ailing economies from defaulting on their bonds.

Instead, leaders of 25 of 27 European countries agreed to sign a new fiscal compact that will legally restrict them from fighting recessions with robust fiscal stimulus. Most economists outside the euro zone consider this approach a dangerous one. Those countries account for more than 20 percent of the world’s economy. Condemning them to longer and deeper recessions will drag down economies elsewhere that depend on trade, from the United States to China.

Without a bigger bailout fund, investors will likely keep betting against weakened economies like Italy and Spain, pushing up their interest costs and, consequently, adding to their deficits. Nevertheless, Europe’s leaders deferred action on more money until March. Market speculators may not agree to wait.

The world has gotten used to failed European summit meetings. What is particularly disheartening about this one is that some European leaders seem to believe they succeeded. “Considering the time frame, this was a real masterpiece,” Chancellor Angela Merkel of Germany said of the new fiscal pact. It was only in December that she made clear to other European leaders that adopting a fiscal pact to balance their budgets and reduce debt was an essential precondition for Germany to continuing to pay its fair share of European debt-relief costs.

The fiscal pact imposes substantial fines on any signatory nation whose deficit averages more than 0.5 percent of gross domestic product over a full economic cycle, a condition the United States would have had great trouble meeting over the past three decades. The summiteers also made ritual nods in the direction of more jobs and higher growth, without providing any new money to achieve this.

As the European Union’s biggest economy, and biggest contributor to the bailout fund, Germany continues to determine the approach in managing the Continent’s economic crisis. Others, particularly those needing help paying their bills, have little choice but to go along, whether or not they really believe that German-dictated austerity will help their ailing economies. Many leaders — Prime Minister Mario Monti of Italy, for example — have made clear that they do not.

A leader wiser than Mrs. Merkel would build a stronger European Union by helping her neighbors grow their way out of debt, not squeeze them to the breaking point. A wise leader would also remind German voters that the prosperity of their own export-dependent economy requires sustained demand in neighboring countries.

Poor German leadership in this crisis has exacted an increasing economic and social price from Greece, Ireland, Portugal, Spain, Italy, Belgium and France. The longer Germany insists on putting fiscal austerity ahead of growth, the more likely it becomes that Germany, too, will suffer economic pain.

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  1. […] NYC General Assembly # Occupy Wall StreetCurrent Affairs for UPSC Civil Services, IAS General Knowledge Questions and Articles, GK for Competitive ExamsWe Are Not ChildrenNYCGA Minutes 2/7/2012Make Wall Street Pay – Good Jobs and A Fair EconomyDrill Press Stand PlansEU Leaders FAIL in Truly Helping the Situation in Europe […]

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    Pingback by “Days Of Discontent And Disconnect” | Living History — February 8, 2012 @ 9:43 pm


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