NEW YORK (ForexNewsNow) – The European sovereign debt crisis has been ongoing for nearly two years now and is unlikely to be overcome despite the undeniable progress in creating new tools to combat its effects on the EU as a whole.
Two years ago, who would have thought that Europe would develop the European Financial Stability Facility (EFSF), which acts like a sort of European IMF? Who would have thought that the European Central Bank would conduct massive purchases of government debt on the secondary market? Not many.
It appears that European integration has been re-energized thanks to the crisis. However, these advances have been painstaking and are still incomplete. The size of the EFSF is too limited to meet the needs of larger countries that may be in sovereign debt danger (such as Italy) and new obstacles are expected in the next few months and weeks. On September 16th, the European Union finance ministers will meet in Brussels – like they do every month – to address various issues.
The Finnish case
The meeting is likely to be a difficult one, particularly because of the lack of solidarity in Finland. The Scandinavian country is threatening to withdraw from the second Greek bailout package announced on July 21st.
The package still has to be approved by national parliaments and the Finnish Parliament is requesting compensation in exchange for its participation in the plan: 200 million euros cash invested in a fund against 1 billion euros in Finnish aid. An agreement was reached with Athens on this issue, but some members of the European Union have reacted with astonishment (Austria, Netherlands, Slovakia and Slovenia – all “AAA” countries).
The agreement still must be endorsed by 16 other states in the euro area.
Other debates regarding the efficacy of the bailout plan exist as well. In Germany, President Christian Wulff has caused a stir by criticizing the purchases of government debt by the ECB.
One has to admit the magnitude of the crisis pushed European governments to accept measures they normally would have never considered. On a related note, the European Constitutional Court is to announce its decision on September 7th regarding the first Greek bailout plan and the support mechanisms in Europe.
Politics in Europe may continue to appear as a sum of national selfishness for a long time…