Workers maintain the huge Euro logo next to the headquarters of the European Central Bank in Frankfurt, Dec. 6, 2011.RALPH ORLOWSKI
From the FT's Lex blog
So many meetings, so little achieved. European Union leaders have held no fewer than fifteen summits since the Greek crisis first blew up in 2010. There have been five grand plans, and many more incremental proposals. Heads of seven euro zone governments have changed as a direct result of the debt crisis -- including the replacement of Italy's Silvio Berlusconi and Greece's George Papandreou by the technocrats Mario Monti and Lucas Papademos. Yet the tally of real achievements is deplorably small.
The European Financial Stability Facility was groomed as a €1-trillion rescue fund for the euro. But its firepower and mandate remain on a tight leash. Eurobonds remain a vague and controversial notion. A voluntary debt swap between Greece and its private sector creditors is elusive. The reluctant but inevitable push for fiscal union is heading into political opposition. True, banks are being pushed to recapitalize, but with such a lack of finesse that assets are flooding the market and lending has stalled. It has been left to the European Central Bank to inject much-needed, but temporary, liquidity.
Contagion marches on, meanwhile. Italy's 10-year bond yield rose from under 5 per cent to over 7 per cent during 2011. True, its borrowing cost fell substantially at an auction on Wednesday. But that was for six-month money. Doubts remain over Italy's ability to fund itself for the longer term: it has to finance €400-billion of maturing debt in 2012. A recession seems inevitable early next year. The euro zone's economy grew by just 0.2 per cent in the third quarter of this year, with growth in France and Germany offset by weaker peripheral economies. The recession will test the ability of Portugal and Ireland to meet stringent targets set by their bail-outs. And the truly ghastly thought is that there will be another EU summit in January.