Connect to share and comment

Burning the midnight oil pays off for EU leaders

Until now, nothing the European Union — even assisted by the International Monetary Fund — has tried against its spreading debt crisis succeeded in improving the value of the euro in currency markets nor in bringing down borrowing prices for debt-ridden governments such as Greece, Portugal and Spain.

In the second overnight session of the weekend, after 11 straight hours of negotiations, finance ministers unveiled their latest attempt to fend off what Swedish Finance Minister Anders Borg called the markets’ “wolf pack behavior”: a massive loan fund worth almost a trillion dollars, available to eurozone governments who might otherwise not be able to pay their bills. The fund combines $570 billion from eurozone countries, plus about half that amount from the International Monetary Fund and up to $75 billion from the European Commission, which will be allowed to issue extra bonds to raise money for the crisis.

EU leaders — if they’ve managed to stay awake — must be feeling pretty relieved to see U.S., European and Asian markets all up sharply.

European Commission President Jose Manuel Barroso crowed on behalf of all. “This morning's agreement will ensure that any attempt to weaken the stability of euro will fail,” he said at a session of the World Economic Forum being held in Brussels. “It shows the determination of the whole European Union to stand behind any of its member states when they are seriously threatened with severe financial difficulties caused by exceptional circumstances beyond their control.”

But despite how confident Barroso sounds — and convincing he aims to be — there’s plenty of skepticism about whether today’s rally can be sustained. After all, loaning these governments money doesn’t change their behavior and it’s fair to question whether the current situation can really be considered “exceptional circumstances beyond their control.” (The Germans had been quite vocal about their feelings that Greece made its own bed and that perfectly solvent countries shouldn’t be forced to share it, but that view was quashed as Angela Merkel was dragged into the rescue.)

In a foreboding sign that one wouldn’t blame EU leaders for ignoring for a day or two, the euro rose against every major currency in early trading but later lost much of that ground. Still, finance ministers fulfilled their task to have a counter-attack in place by Monday morning and things do look better for the eurozone, and by extension the entire EU, than they did last week. 

http://www.globalpost.com/notebook/european-union/100510/burning-the-midnight-oil-pays-eu-leaders