There are soothing noises again about the Euro. It looks as if there is a wish to keep Greece in for a bit longer. Presumably Greece will be told there is no more money to borrow overall, to try to keep the Germans happy. Greece will also be told she can draw more of it down more quickly, to “tide her over”. The can is kicked down the road again. More money is lent, but we will be told the tough discipline remains.
The European Central Bank has talked Spanish and Italian shorter bond yields down, lowering the cost of financing the governments for a bit. They have done so by promising to buy loads of these bonds if needed to keep the interest rates down.
However, under the latest rules, they will only be allowed to buy bonds if Spain and Italy first submits to an EU/IMF approved programme to cut the deficit further and faster. The Spanish Prime Minister is clearly reluctant to commit to this. Will the markets require it? Can the halo effect of a promise of bond buying last long enough to allow Spain to raise enough extra money to keep it going?
Mr Draghi is hoping the member states will do more. He wants them to supervise errant members more precisely. He wants them to get on with setting up the bail out fund and using that. He made plenty of money available to the banks to buy them time, not to become a permanent part of the system.
Meanwhile the southern states just want the European Central Bank to buy up the bonds they need to issue to borrow. They know the ECB cannot lend the money directly to their governments, but it can buy them in the secondary market. They know it does not have lots of money, but it could always like the Fed and Bank of England create it.
There’s a lot of people hoping someone else is going to administer the next fix. It does seem Mrs Merkel now wants them to fix it, but not at an any cost and not in a way which is too provocative to cautious German public opinion.
No-one is fixing the underlying probelms. The southern states remain uncompetitive at their locked in exchange rate. The northern states are still not sending enough money to the poorer parts of the union. The Euro limps on.