Monday 18 December 2017

Coherent policy would be good start if leaders want to save the euro

Franco-German strategy is devoid of direction as it confronts a eurozone crisis that is descending into farce, says Colm McCarthy

The markets calmed down last week as European politicians chewed over the options for dealing with the eurozone banking and sovereign debt crises. But it looks like a temporary truce. Sellers of government bonds are being held at bay through the willingness of the European Central Bank to buy huge quantities of Italian and Spanish debt.

A total of €36bn has been spent since August 8 to avoid these countries needing EU/IMF rescue. The total does not include last week's bill, to be revealed tomorrow. This programme is a stop-gap measure and the ECB cannot continue to buy eurozone sovereign debt indefinitely, even with renewed commitments to budgetary tightening in Italy and Spain.

The most interesting developments last week have been in Germany, where political opinion is divided on the critical question of how far the Franco-German leadership should go in order to save the eurozone.

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