In positive week for eurozone, warnings rise that crisis isn't over
The Greek bailout and cheap loans may have pulled Europe back from the edge, but economists warn that without real change, the eurozone will continue to teeter.
A homeless person begs in Syntagma square, backdropped by the Greek parliament, in central Athens, on Thursday, March 15. Countries in the 17-nation eurozone on Wednesday formally approved a second bailout for Greece and authorized the release of €39.4 billion ($51.44 billion), as they had signaled last week.
Petros Giannakouris/AP
Berlin and Frankfurt
Europe is heaving a sigh of relief. A messy Greek default has been averted, a permanent rescue fund is about to be installed to prevent future “credit events” with EU governments, Europe’s banks have received massive cash injections from the European Central Bank (ECB), and there is relative calm in the financial markets.
Is this the beginning of the end of Europe’s debt crisis?
No, it is not, warns Jens Weidmann, president of the German central bank, the Bundesbank, and former economic adviser to Chancellor Angela Merkel.
“At its roots, the debt crisis is a crisis of confidence in public finances, and one of competitiveness of certain European economies,” Mr. Weidmann told reporters in Frankfurt earlier this week. “These issues have to be addressed by national policymakers. If our liquidity provision results in these politicians not addressing the problems, we have gained nothing.”
The remarks were a rather undisguised criticism of the ECB – on whose governing board Weidmann sits – and its strategy of pumping cheap money into the European banking system to spur liquidity. In the past few months, the ECB has handed out more than a trillion euros worth of three-year loans to European banks at a mere 1 percent interest. ECB president Mario Draghi was praised widely for his initiative, but the strategy, Weidmann said, could encourage banks to adopt unsustainable business models and governments to slow the pace of fiscal and structural reforms.
