Europe’s spreading crisis

The victory of a pro-bailout party in Greek elections this week eased fears that the country would have to exit the euro, but surging interest rates on Spanish and Italian debt signaled that the nearly three-year-old euro crisis is far from over. In Greece, the center-right New Democracy party, which has vowed to keep the country in the euro zone, narrowly defeated the anti-austerity Syriza party, prompting relief across global markets. But attention soon shifted to Italy and Spain, where the interest rates investors demand on government bonds spiked-—in Spain’s case to a euro-era high. In response, European leaders are reportedly weighing whether to allow the European Union’s bailout fund to buy hundreds of billions of dollars worth of Spanish and Italian bonds in an effort to drive down borrowing costs.

Sorry if you thought the Greek election would be a turning point in this endless euro saga, said John Cassidy in NewYorker.com. Sure, if Syriza had been victorious, “the consequences could have been catastrophic,” with a likely Greek exit from the euro and contagion throughout Europe. This outcome buys Europe “a bit more time,” but brings the crisis no closer to a resolution.

The EU should use this brief respite to “rethink its whole approach” to the crisis, said Gideon Rachman in the Financial Times. It’s clear now that “the fate of the euro will be decided in Spain and, above all, Italy.” It simply won’t be possible to bail out two of the Continent’s biggest economies, so if European leaders aren’t prepared to take “dramatic steps toward banking, fiscal, and political union,” they need to “go backward—and to return to national currencies.” We’re getting “perilously close to the moment” when the situation in Spain and Italy “becomes irretrievable.”

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Yet Europe still seems unwilling to do what’s necessary, said The New York Times in an editorial. There’s no doubt that the “relentless insistence on self-defeating austerity and piecemeal rescue plans,” led by Germany, has only created more mistrust between countries and deepened their recessions. Europe now has another chance to take decisive steps to end this crisis, like issuing eurobonds or backing off mandated austerity measures. Will it? If the past two years are any guide, “the likely answer is no.”