Tuesday, June 5, 2012

Euro Deal in the Offing?

Outlines of a euro deal have begun to leak. The plan would be to absorb all "non-Maastricht compliant debt," that is, national debt exceeding 60% of GDP, into a fund that would be paid off by all member states over 25 years. In exchange, members states would give up additional control over their national budgets to a central authority, although it remains sketchy what this would entail.

Clearly, the crisis has entered a new stage. Portugal announced an infusion of new capital into its banks, and Spanish banks have been in the news for weeks. So the Germans are ready to make their move, lest the whole system collapse, and now we will see what they want in return for their cooperation. The price is not likely to be small, and the political ramifications in the south will be interesting to watch.

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