There’s been talk of Greece returning to the drachma and now the European Union and Germany are said to be exploring the possibility of rescuing Spain. On this week’s first Backstory, Peter Spiegel, Brussels Bureau Chief for the Financial Times, talks about the latest developments in the ongoing economic crisis in the Eurozone.
Following a weak employment report on Friday and continued grim news out of Europe, some worry the United States economy may be on pace for another slowdown.
European leaders have drawn up a new fiscal accord. In the new agreement, the European nations agreed on tighter budget regulations as part of an effort to reassure investors that the euro is a stable currency. "The most important question from our citizens, from our financial markets, our investors, are we 17 in the euro zone or are we one?" said Jerzy Buzek, the president of the European Parliament, on Friday. "Now is the answer. We are one."
On today's second Backstory, we'll look at the latest efforts to stabilize the Eurozone as the debt crisis there continues. Peter Spiegel, Brussels Bureau Chief for the Financial Times, gives us an update on the first day of meetings of European leaders in Brussels, and whether a proposed overhaul of the European treaty is likely to find support there.
In Cannes, leaders from the world's 20 largest economic nations are meeting to discuss the most pressing fiscal matters across the globe. On top of that list is Greece and the high-stakes political gamesmanship of the country's Prime Minister George Papandreou. Papandreou called off a plan to hold a referendum on his country's loan deal with the European Union Thursday after he gained new support for the deal from the opposition. Greece is in a tense political stalemate as its fate with the euro zone hangs in the balance. Papandreou is trying avoid a economic catastrophe as he faces calls for his resignation and a no-confidence vote on Friday. Papandreou's political brinkmanship has renewed questions about the instability of the euro zone and the destabilizing roles of deeply indebted countries.
On Thursday, Slovakia's parliament approved the latest proposal to address the Eurozone's debt crisis, but it was the second time that the measure came to a vote this week. On Tuesday, the parliament had rejected it. On today’s second Backstory, Peter Spiegel, Brussels Bureau Chief for the Financial Times, discusses some of the reasons behind the rejection and how the Eurozone’s smaller countries feel about the plans to stabilize the economy that have been developed by the larger economies of France and Germany.
In testimony before a Congressional committee on Tuesday, Federal Reserve Chairman Ben Bernanke warned lawmakers that the economic recovery U.S. "is close to faltering." Bernanke said the central bank was prepared to do more to bolster the economy, but that Congress needed to do more to encourage growth. In June, Bernanke had said, "growth seems likely to pick up in the second half of the year." Bernanke's grim assessment comes after the economy barely grew in the first half of the year, and there were no new jobs in August. Consumer confidence fell this summer to the lowest point since the recession.
The European Central Bank announced yesterday it will work with the Federal Reserve to open new lines of credit to banks in the 17 nations that use the euro. The Bank of England, Bank of Japan and the Swiss National Bank are also pitching in to help. The ECB says it will allow banks in the euro zone to borrow money for three months — rather than the previous rule of a week — which injects dollar liquidity into European banks. The news comes as European banks are suffering from chronic financial squeezes.