Hopes for a breakthrough on several fronts in the global economy came to naught this week. EU leaders met, and discussed, and discussed some more. Solutions to the spread of financial distress affecting France, Italy, Greece, Spain, and Cyprus appeared at hand. Markets rallied after the European Stabilization Fund was announced which would buy sovereign debt and lend to banks across the EU. The compromise solution avoided the more prickly bailout mechanism of direct loans to financially unstable countries. Have any of the foundational problems changed? Sadly, no.
Even though the immediate money squeeze has been solved broader concerns remain. How do European countries orient themselves back to growth? Unless they succeed in upping their competitiveness both banks and governments will be in the pauper’s line , hands outstretched for another bailout. Spanish banks avoiding default is welcome, but that’s little solace for the 25% unemployment rate except, for the moment, to keep it from rising further. Will banks start lending to small and medium sized enterprises and stop making bad loans on real estate? Let’s hope so.
Back to “The Week That Was“.