The FT, citing two confidential analyses which were distributed to EU leaders on Friday, warns that the current lull in the storm that’s been roiling the financial markets is only temporary—a reprieve bought at the steep cost of €1 trillion spent to date. The underlying problems are as far as ever from a solution. Portugal and Spain are struggling, and will most likely be where the next stage of the crisis will unfold.European leaders know this to a certain degree:
“There is no sum with which you can convince financial markets,” [German finance minister] Mr. [Wolfgang] Schäuble said, referring to the size of the eurozone firewall. “You can only be convincing with structural measures.”
Reforms can be painful for the electorate and are often quite politically destabilizing in the short term. And though Spain has just passed its most austere budget since the Franco era, not spending money is not the same thing as making your economy more competitive. The road ahead is very difficult, and there seems to be no sign that Europe is anywhere near finding a way out.A trillion euros got Europe out of intensive care and into the chronic disease ward, but that is not the same thing as a cure.