Spanish bailout, Greek elections make June a make-or-break month in debt crisis
Europe's debt crisis, magnified by the Spanish bank bailout and Greek elections, puts Europe at a crossroads: move to real fiscal union, which populations don't want, or break apart. There's a way to avoid this awful choice. Build up Europe and build it down at the same time.
One day, when historians look back to June 2012, they will likely find it was a make-or-break month for Europe. The debt crisis, now in its third year, has produced a moment of extraordinary clarity for the 17 countries joined by the euro: Either move toward real fiscal union or break apart.
After two years of incremental reforms brought on by the crisis, big questions have muscled their way onto the European agenda. Popular revolts against austerity and the conditions attached to bailouts in Greece, as well as a crisis of trust in Spain and its banks, create a dilemma for Europe’s leaders: They are forced to centralize more power in Brussels at a time when ever more citizens resist that idea.
In order to survive, the eurozone must do both. It must centralize more (move closer to a federal model of governance) and respond to its citizens’ concerns.
For the first time, the pressure to fix the construction error of monetary union – erected without any binding, central fiscal authority – might be great enough to force Europe’s nations to cede substantially more sovereignty.
The battle lines for a June 28-29 summit of European heads of state are drawn. On one side are southern debtor countries that want German money soon in order to calm the financial markets. But these countries wish to give up as little sovereignty as possible later – the price demanded by the Germans.
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