Editorial Round-up: EU Rescue Plan
Now that European leaders have agreed to a 750 billion euro ($955 billion) relief plan to stem Europe’s debt crisis, steps are being taken to make the money available to eurozone countries in need of the help — and reactions are rolling in.
On Tuesday, Germany’s cabinet approved a draft law to provide 123 billion euros in loans to countries deemed to be insolvent by other euro states, the International Monetary Fund, and European Central Bank. Countries receiving the loans would have to agree to deficit-reduction measures with the IMF and ECB.
Economic columnists and editorial writers from a variety of news outlets are writing about the EU deal and what it might mean in the region and beyond. Here is a sample:
Bahador Saberi and Christian Teevs write in German newspaper Der Spiegel that the deal’s “side effects may be difficult to stomach”:
“The structure of Europe’s monetary unity has been fundamentally changed, not least by the provision allowing for the European Central Bank to begin buying up member states’ debt. The principal mandating that each country is responsible for its own budget would appear to have been jettisoned. Indeed, the package may result in countries’ abandoning tough austerity programs in the knowledge that they will be bailed out.”
Gideon Rachman in the Financial Times says Europe has bought itself some time, “but the long-term problem remains”:
“Most of the European Union is living beyond its means. Government deficits are out of control and public-sector debt is rising. If European governments do not use their new breathing space to control spending, financial markets will get dangerously restless again. Unfortunately, European voters and politicians are simply unprepared for the age of austerity that lies ahead.”
In another British newspaper, the Guardian, Phillip Inman writes about the “lessons that Europe failed to learn” and alternatives, such as extending existing loans:
“Why not pay off our debts over a longer period? It will already take a generation to get rid of it all. Will the markets buy that? Just as my mortgage company happily accepts extending my loan by 10 years, there is no reason why not. Of course I need to stop overspending and cut up my credit card, but forcing me — or Greece — to default helps no one, especially when much of the loan is supplied by European investors and pension funds. Maybe they don’t care as long as they get their money, but they should.”
An editorial in the International Herald Tribune questions whether the EU debt deal — with the underlying assumption that countries can regain their ability to service their debts by cutting budget deficits — is really enough:
“We understand why European governments are not demanding that the banks share the burden. Rescheduling Greece’s debt, or that of other governments, could weaken the balance sheets of European banks and make financial markets more unstable. That’s the reason the Obama administration went so light on American banks. Still, Europe may not be able to solve its problems without bringing the bankers in to pay their share.”
From the Tribune’s sister publication across the Atlantic, the New York Times, Roger Cohen writes about the roots of the problem:
“Europe now faces the choice (Treasury Secretary) Timothy Geithner faced in the United States over a year ago: costly containment or collapse. I don’t see a serious alternative to the $140 billion EU and International Monetary Fund Greek rescue; and an even bigger EU emergency funding facility should help shore up confidence. But the core problem — that the euro has bound vastly disparate nations in a halfway house where monetary and fiscal policy are not under unified direction — will fester.”
On Monday’s NewsHour, Gwen Ifill spoke to John Lipsky of the International Monetary Fund about the decision to create the financial safety net for Greece and other vulnerable countries: