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EU summit yields a tentatively hopeful outcome - Daily News Egypt
Daily News Egypt

EU summit yields a tentatively hopeful outcome - Daily News Egypt

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EU summit yields a tentatively hopeful outcome

EU leaders have concluded the two-day summit with three decisions that might just rescue the EU’s debt-stricken banks from a total calamity.


European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso at a news conference after the EU summit in Brussels. (AFP Photo)

After another long night of tense deliberations, and much to everyone’s surprise, EU leaders have concluded the two-day summit with three decisions that might just rescue the EU’s debt-stricken banks from a total calamity.

Under immense pressure from the governments of Spain and Italy, summit leaders have finally come to a consensus.

The first decision is allowing the European Central Bank to directly inject capital to the Eurozone’s private banks as opposed to funnelling them through state banks, a move that would sidestep straining the insolvent sovereigns with more debt.

The decision comes in tandem with the establishment of an intra-European single banking regulatory mechanism.

However, as extant Eurozone regulations allow the European Stability Mechanism (ESM) to only bailout EU member governments, the European Financial Stability Facility (EFSF) will take charge until a new treaty is drafted to sanction the ESM’s direct injection of capital to the EU’s non-governmental banks.

The second decision is committing USD 149 billion in existing emergency reserves to stimulate economic development by funding a multitude of key business programmes and creating more employment opportunities.

Last but not least is the decision to ease EU borrowing conditions and increasing the flexibility of EU lending terms; such step would allow struggling countries like Spain and Italy to seek aid from the EU without having to worry about severe austerity measures such as those imposed at the birth of the crisis.

European financial markets surged in reaction to the results of the summit, with the Euro jumping 0.8% to $1.2667.

Milan’s FTSE MIB rose 6.59%, Athens by 5.68% and Madrid soared by 5.66%. Germany’s DAX 30 rose by 4.33% Paris’ CAC 40 closed 4.75% higher, while London’s benchmark FTSE 100 index ended the day up 1.42%.

Commenting on the outcome of the summit, Herman van Rompuy, president of the European Council, stated that“the money will be invested in all EU countries, especially those in distress, to help them step out of the crisis through growth.”

In addition, he was unequivocal in stressing the need to “stimulate growth, not only to invest more money, but also promote trade and innovation to promote economic growth by improving the European single market system, solve the unemployment problem.”

The decisions reached at the summit may provide a short-term rescue package that would, for the time being, keep the Euro from totally collapsing.

However, resolving the structural stumbling blocks curtailing the resolution of the Euro crisis necessitates more than just moving money around.

It requires a deep re-examination of austerity versus growth measures to successfully gear the old continent away from a full-blown financial crisis.

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https://www.dailynewsegypt.com/2012/07/01/eu-summit-yields-a-tentatively-hopeful-outcome/
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