European Central Bank President Mario Draghi pledged pledge to save the euro with “decisive action.” This would supposedly come from printing euros to buy the bonds of the nations in worst trouble. That calmed markets last week, but the details offer little solace. According to the Financial Times, Germany’s Bundesbank issued a statement saying it was opposed to the purchases. So don’t expect any action when the ECB’s policy committee meets Thursday.
Inaction means continued slipping into recession, and not just in the PIIGS. Although Germany’s economy has remained strong, its bonds a safe haven and consumer confidence high, that may be changing. Big German companies are reporting disappointing earnings. For all the temporary breather, Spiegel reports that economists warn the zone is on the “threshold of catastrophe.”
The Europeans will take their August vacations and then make sure your seat belts are fastened and your tray tables are in their full upright and locked position.
All the half-measures just keep making the situation worse, buying time for nothing. If Germany won’t give on eurobonds, and the others won’t allow the tighter political union that Germany demands, the breakup of the euro is inevitable with world-shaking consequences. The real alternative is to write off the bad sovereign debt. It’s time to stop killing growth to save improvident banks.
And Don’t Miss: Canada’s oil, the world’s carbon || NY Times
Today’s Econ Haiku:
Gentle summer here
Where are those record high temps?
Let’s export King Coal