The good news? France and Germany seem to be in agreement. The bad news? They agree Europe needs more belt tightening so that bankers can get more relief.
The leaders of France and Germany, reportedly, are discussing ways to compel European nations to have a common fiscal policy without resorting to the cumbersome process of amending the EU treaty. This was enough to reassure stock markets for the moment, which are nothing if not subject to herd instincts.
But who are we kidding here? More austerity may appease the bankers’ need for their pound of flesh, but it will only make the Great Deflation worse. A common fiscal policy is a good idea, but one biased towards austerity is exactly the wrong medicine
Before this crisis is over, the Europeans will need to find their way to a common invest-and-grow strategy, which includes debt relief for struggling countries; as well as Euro-bonds and a real crackdown on banker abuses. And the European Central Bank will have to function as a true lender of last resort, helping not just banks but sovereign nations subject to speculative attacks by hedge funds.
Until that day comes, Europe and the Euro will lurch from crisis to crisis.