Are there signs of a comprehensive EU approach to the crisis?
No. The last EU summit on October 27 issued a communiqué that contained references to all the needed reforms—increased capacity of the European Financial Stability Facility (EFSF), bank recapitalization, and Greek debt restructuring. It also opened the door for longer-term reforms to the set up of the Economic and Monetary Union (EMU) that would require treaty changes.
However, the devil is in the details and there was no new money pledged for the EFSF, the bank recapitalization gave scope for banks to cut back instead of increase lending, and the Greek debt restructuring lacked crucial elements that still require negotiation. And the intention to reform EMU governance, requiring approval by parliaments across the eurozone, is not sufficiently specified or credible.
However, the devil is in the details and there was no new money pledged for the EFSF, the bank recapitalization gave scope for banks to cut back instead of increase lending, and the Greek debt restructuring lacked crucial elements that still require negotiation. And the intention to reform EMU governance, requiring approval by parliaments across the eurozone, is not sufficiently specified or credible.
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The result is that very little remains of the October 27 package, which is one reason markets are so jittery, and so much has been placed in the lap of the European Central Bank (ECB). The German position (no new money, no ECB guarantees, and no euro bonds) would place the whole burden essentially on troubled countries to reform with very little additional help from eurozone partners. This is unrealistic.
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