If German Chancellor Angela Merkel is going to allow the European Central Bank to bailout indebted countries, euro zone members must first agree to long-term structural changes to the European Union. The question is, can Europe wait that long for a solution to its mounting debt crisis? Not everyone's in agreement about the best road forward.
She's waiting too long In a speech today, Merkel outlined her country's plan calling for a system that would further integrate euro zone countries implementing a system for monitoring the budgets of individual countries. "The goal is a fiscal union that enforces both fiscal discipline in its members and has the necessary instruments to effectively handle a crisis," she said. Her critics say a fiscal union may be well and good but the continent desperately needs the European Central Bank to issue Eurobonds to buy up the debt of struggling countries and stave off a run on the banks. Merkel says the structural changes must come first. For that, The Washington Post's Ezra Klein chastises her saying "she's withholding the cure from a very, very sick patient here. And though it's true that the patient needs to commit to a healthier life, he first needs to survive this disease." In today's New York Times, the editorial board agrees. "If it waits until euro-zone countries agree to give the central bank or the European Commission control over their budgets, the euro is probably doomed." The newspaper says Merkel's fear of inflation is an "implausible concern for economies that are slipping into recession."
She's doing the right thing Looking at the big picture, Business Insider's Joe Weisenthal says focusing on structural changes is acutally a welcome development because there's only so much a short-term bailout can accomplish. "The bottom line though is that now Europe is clearly talking about root problems, and what it will take to fix things, rather than just talking about throwing a wheelbarrow full of Euros at the problem." Marc Chandler, global strategist for Brown Brothers Harriman, also agrees, writing in a research note that EU integration is essential to instilling confidence in global markets. "We continue to believe that tighter fiscal coordination is a minimum requirement, together with a backstop for sovereign debt, be it the [International Monetary Fund,] the ECB or a combination of both."
The attention now moves to December 9, when EU leaders will meet in Brussels to discuss Merkel's proposal. At this point, it's anyone's guess what may come out of it. For Simone Foxman at Business Insider, the expectation is a road-map for greater integration. "Instead of a quick fix, we'll probably see a long-term outline of the measures leaders are going to pass and the criteria for an expansion of the ECB's powers in the medium term. Markets will gauge their reaction upon how credible this plan is, and how far it goes towards truly resolving the problems of the EU currency union."