I was in Ischia, off the coast of Naples, during the latest euro zone summit. Many of the Italians present during the award of this year’s Ischia prizes for journalism thought that Italy had won two victories over Germany: in football, at the European championships, and in economics, at the European summit.
Then came the football final, against Spain. How much is likely to be left of the summit euphoria a few months from now? The answer, I believe, is: something, but not all that much.
The 19th crisis summit was better than many of its disappointing predecessors. But the game has not yet changed. Helpful steps were taken.
The most important were the agreements to allow the euro zone’s rescue funds to recapitalize undercapitalized banks directly, rather than provide money via vulnerable governments (of particular benefit to Spain and potentially enormous benefit to Ireland) and to buy sovereign bonds in the market (of apparent benefit to Italy and Spain).
It was also agreed that loans from rescue funds would not be senior to existing loans, which should reduce the risk of panics by lenders. Leaders also agreed a 120 billion euros ($151 billion) package of measures to promote growth.
On the principle that support should coincide with control, the European Central Bank is to be given responsibility for a new system of European banking supervision, as a step towards what protagonists hope will be a true banking union.Page 1 of 5 | Next Page