Policy makers, bankers, and academics from around the world have told European policy makers that enough is enough and decisive action is now irrevocably necessary; the crisis must be ended not just contained.
The World Economic Forum concluded yesterday with a clear set of goals for the Eurozone. EU leaders must; deliver a larger bailout fund, in the region of $1 trillion; finish crafting tougher budget rules, in the form of the fiscal compact; and finally reduce Greece’s debt burden down to a manageable level.
Global financial markets and world economic growth are in the balance and failure to remedy the current crisis swiftly will lead to the region being cut from further outside support, according to Billionaire investor George Soros and US Treasury Secretary Timothy F. Geithner. Bank of Canada Governor Mark Carney summed up the message rather succinctly: “There’s a very strong view to get on with it, get this thing done.”
Mario Draghi’s decision to offer banks €489 billion of cheap 3-year loans was applauded and the initial results – reduced market lending rates, improving economic results, and falling bond yields – were viewed as signs of stabilization across the 17-nation bloc. However the overarching concern is to ensure that EU leaders build upon these stabilizing actions in order to lift the Eurozone out of contraction. World Bank President Robert Zoellick said: “I’m really glad the ECB took these actions, but let’s not be complacent. This buys time, you still have to act.”
Harvard University Professor Niall Fergusson suggested, as have many others, that joint issue Eurobonds are the only viable means to an end. As things stand Germany is bulldozing its way through the crisis whilst the southern Euro states are crumbling at the seams. Proper fiscal unity is necessary to allow the bloc to function as a successful marketplace and sacrifices are going to have to be made by the larger economies if the Eurozone is going to stand a realistic chance at revival.
German Chancellor Angela Merkel seems hell-bent on budget cuts and deficit reductions but real growth is needed to rejuvenate this dying economy and that will not be possible without concessions from Europe’s most successful nation.