Europe’s Tightening Window of Opportunity
Nicholas Iaquinto was previously the Communications Coordinator / Web Developer at AICGS.
Joining the growing number of high profile warnings on the future of the European and world economies, World Bank researchers gravely take note of the euro zone’s eroding gross domestic product, which is expected to decline 8.5 percent in the coming year. Given this path, they are asking themselves “what will happen, when large euro zone states that slide nearly one third in GDP, collapse, and have no way to get credit?”
Sparking global consequences, this so called horror-scenario is not the only warning in the past week. Appearing on CNN with Christiane Amanpour, International Monetary Fund director Christine Laguarde corroborated billionaire George Soros’ evaluation of the window of opportunity to solve the crisis and avoid further collapse. Giving the euro zone “more shortly than three months”, Laguarde’s admonition expounds on the overwhelming urgency of the above scenario.
Accordingly, this increased pressure on both European Union and domestic officials has translated to likewise increased urgency to enact solutions. The President of the European Commission, José Manuel Barroso, has reflected this closing window in his recent calls to make euro bonds a fixture of the euro zone. Working to adopt state debt at the euro zone level, this action to deepen the monetary union, however, is met with strong hesitations in Germany. Citing the lack of common control mechanisms, some even suggest that a complete fiscal union is a requirement to issue euro bonds with confidence that individual member states will not violate debt agreements.
In this sense, the window of opportunity for solutions to avoid further economic disaster is slowly running out and efforts to reach a solution are still mired in disagreement. How will Barroso convince Germany and other states to take on collective debt? Could Europe prove as unable to pass solutions as the U.S. Congress? Does this scenario mean that the euro zone must integrate fiscal policy or dissolve?