The chief concrete change that came out of the summit is the one I reported would most likely happen (over a month ago). The ESM can now directly recapitalize banks. This “surprise” good news announcement buoyed markets yesterday.
The BBC identifies the challenges that lie ahead:
“The agreement appears to be a concession by Germany, which has insisted on strict limits for Eurozone lending. The Maastricht Treaty which launched the euro does not allow governments to be bailed out directly with EU taxpayers' money - yet that is where the rescue funds' money comes from.
Some elements of a fiscal union are so fundamental that they would require treaty changes and at the very least referendums in some countries. All of that could easily take 10 years.”
We will see what German opposition (previously in favour of faster integration) thinks of this now that reality is getting closer. The Eurozone does not have 10 years to get this right. They might have 1 year if they can show evidence of progress.
My scepticism that there will be a failure to rescue the Euro remains unchanged. I think this current honeymoon lasts unlit the quarterly GDP numbers start rolling in.
The UW Professor poster thinks race is a component.
"I would be (slightly) less concerned about the nativist component of these moves if there was a commensurate Germany-bashing campaign. After all, Germany is running a substantial trade surplus, and by way of supporting an essentially contractionary eurozone wide fiscal policy, is weakening the euro. It might be that there are too many steps for some observers to make. Or it might be something else; I leave others to speculate."
Ok I will speculate.
Racism is certaintly a component of the human condition, but I think it matters with whom you run a trade deficit. The US runs their's with China-not Germany.
I think Germany is not that popular in certain Euro zone peripherry countries right now - countries with whom Germany has run large surpluses. :)
Anyways, as I have said many times on these pages, increasing trade restricitions seems to be an inevitable stop on this global crisis train.
“once group loyalties are engaged, you can’t change people’s minds by utterly refuting their arguments. Thinking is mostly just rationalization, mostly just a search for supporting evidence.”
New Yorker on why Republicans have rejected the individual mandate for healthcare despite having embraced it for 15 years prior to Obama. (Democrats are the same - as the article points out.)
Highlights the enormous difficulty the Eurozone will have achieving integration given their fractious politics.
Very similar to what I wrote in my Geopolitics of Energy article last November.
In determining the legality of online poker – a multibillion dollar industry -- courts have relied heavily on the issue of whether or not poker is a game of skill. Using newly available data, we analyze that question by examining the performance in the 2010 World Series of Poker of a group of poker players identified as being highly skilled prior to the start of the events. Those
players identified a priori as being highly skilled achieved an average return on investment of over 30 percent, compared to a -15 percent for all other players. This large gap in returns is strong evidence in support of the idea that poker is a game of skill.
Fiscal discipline – So far, Europe has tried to solve the problem largely through “austerity” - forcing massive cuts in government
spending in Greece and elsewhere. This is problematic because it typically deepens economic weakness, so that revenues fall, and the deficits actually get worse. Over a longer period of time, it’s possible to reduce the debt/GDP ratio through gradual changes in fiscal policy, particularly if interest rates are lower than the growth rate of the economy (which helps you to grow your way out of the debt), but focusing so much on austerity hasn’t been helpful. Germany has been focused on creating a “fiscal union” to provide stronger external control of budgets, but that sort of agreement would take time, because it would have to be approved by all of the EU member governments.
David Rosenberg qutoes Felix Zulauf from Barron's Roundtable (via Zero Hedge).