Europe's Tenuous Breakthrough
European leaders have been saying the right things, but can they turn those words into action?
We're so used to European summits to produce nothing more than a carefully worded, but essentially meaningless, statement that is easy to dismiss them as nothing more than stagecraft. But the summit that wrapped up at the end of June has played against type. European leaders actually made progress on substantive measures that could actually help mitigate the sovereign debt crisis. However, they hardly solved the crisis. There might be a light at the end of the tunnel now, but that tunnel remains incredibly long.
New Plan Is a Step Forward
Crafting a plan to shore up the European banking system was the most important thing to come out of the summit. Banks, big and small, constitute one of the weak links in Europe at the moment. Unlike banks in the United States that aggressively recapitalized and shed toxic assets, European banks are still burdened with bad loans. Add in the emerging pan-European recession along with worries about the future of the euro, and you've set the stage for a potential banking crisis.