Saturday, June 23, 2012
Growth Pact but No Stability
As I predicted, Frau Merkel has given France and the south a bone to chew on--€130 billion in stimulus money--while remaining firm on her refusal to shore up Spanish banks without some oversight mechanism. It's a tough position, but I can'say it's an unreasonable one, given the irresponsible lending by Spanish banks in the past (abetted, of course, by northern banks). Potential lenders are unlikely to be impressed, so Spanish and Italian borrowing costs will continue to rise, and the euro will move closer to the brink, until a new deal can be struck.