Markets go down as well as up, and there was serious nervousness about the eurozone economies. There were talks of a domino effect: first Greece, then Portugal, Spain etc. The past few days and weeks have been the first severe test for the euro, and it survived. For the moment, at least. By agreeing to set up a ‘European financial stabilisation mechanism’ with a total volume of up to €500bn and a eurozone ‘Special Purpose Vehicle’ up to a volume of €440bn, ECOFIN managed to avoid an almost certain, immediate, disaster. The markets have calmed down a little after yesterday’s elation. It remains to be seen, whether this mechanism is sufficient on its own in the long term, and whether the EU Member States will be able to take the necessary measures to stabilize their fiscal positions. However, the European governments managed to come up with a deal, and showed political will and intent to face up to the problems, and this seems to be a good sign.
Euro saved, for the moment
11 May 2010