Thursday 14 December 2017

ECB must step up to the plate and end this panic

Changing EU treaties will take too long -- this crisis requires an immediate response, writes Colm McCarthy

THE steps necessary to stem the immediate eurozone crisis do not need treaty changes, which is just as well, since treaty changes would take two years or longer. The financial crisis could spiral out of control over the next few months and a disorderly break-up of the euro needs to be averted in the here and now. Adequate instruments to achieve this are available within existing arrangements and indeed have been available all along, but it now appears that they will not be deployed, principally because of German opposition, unless eurozone members agree to ultimate treaty changes.

Next Friday's European summit will be the 15th designed to end the crisis. Previous editions have provided plentiful losses for those who believed the post-summit spin. Those market players who took the view that the spinners were in denial about the scale of the problems and lacked the necessary conviction to deal with them have been proved right every time.

The post-summit market rallies have, however, been getting shorter and risks of a real financial panic have been rising. There will come a point, if decisive action is continually deferred, where one or more of the major bond markets comes seriously unstuck and Europe's single-currency project is imperilled. There is now no short-run option other than a decisive intervention in the Italian and other threatened bond markets.

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