The fight for the euro

In their 14th meeting in the past 21 months, Europe's leaders agreed on a plan to shore up the region's banks.

European leaders agreed this week on a plan to shore up the continent’s banks, but remained at odds over how to solve the eurozone’s debt crisis. It was their 14th such meeting in the past 21 months, and though leaders sought a breakthrough to stem the tide of debt and restore the euro’s credibility, sharp disagreement over the details of how to reform Europe’s economy undermined hopes for real progress. As The Week went to press, two critical issues were unresolved: a restructuring of Greek debt that would require private lenders to accept a loss of as much as 50 percent on their loans, and an increase in the continent’s $600 billion bailout fund to more than $1.4 trillion. “The world is watching,” German Chancellor Angela Merkel said. “It’s watching whether we’re ready and able, in the hour of Europe’s deepest crisis since the end of World War II, to accept responsibility. If the euro fails, Europe fails.”

Europe’s leaders have no more time to waste, said the Financial Times in an editorial. Uncertainty about the euro’s future is “worse than ever,” and Europe can’t afford “another half-baked solution dressed up as the real thing.” A failure to put “money—not another promise of money—on the table” will spell disaster for all of Europe. The large sums now needed “are dwarfed by the cost of doing too little.”

Move over, Greece, said This debt crisis is “now all about Italy.” The eurozone’s third-largest, and second-most-indebted, economy is the summit’s elephant in the room. The leaders fear that markets will “turn on Italy” once Greece’s debt is restructured. But even a bigger bailout fund might not stop investors from driving up Italy’s borrowing costs and pushing it closer to default. Prime Minister Silvio Berlusconi, meanwhile, offers unrepentant “buffoonery” instead of a “credible plan to reform his country,” only reinforcing calls that he resign.

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Europe’s dilemma “would be funny” if it “weren’t so tragic,” said Paul Krugman in The New York Times. For any reform plan to work, EU leaders have to look credible enough for their promises to matter. Instead they “just keep looking more and more ridiculous.” And that, I’m afraid, leaves the euro looking “doomed.”

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