On Friday, December 9, 17 countries of the euro zone formally agreed to run only minimal budget deficits in the future and gave the European Court of Justice the right to strike down national laws that could lead to governments overspending.
“We have a very good result,” said the president of the European Parliament, Jerzy Buzek.
Europe might be on sounder fiscal footing after Friday's historic pact for more coordination among nations. The markets had big hopes on the results: CAC40 and EUR Stoxx 50 were colored green.
Good for the future, but the drastic steps did little, however, to bring down the sky-high bond yields plaguing some European nations now.
Europe has two problems—the weak economy and the financial phenomenon.The financial problem can be fixed in the shorter term. The other one isn't going to be. Even Europe solves its financial crisis and avoids a breakup; it still has to deal with its economic doldrums. Across the Continent, nations are cutting their budgets, which could weigh on growth.
What of the embattled euro itself? It is likely to stay under pressure because even the so-called solutions to the fiscal disaster are negative for the currency. Austerity measures, for instance, will likely cause the euro-zone economy to slow, which is typically bearish for a currency. And if the ECB steps in to buy bonds, that could cause the euro to drop as well.
I like Greece, see my notes from our last October visit to Crete , in current EUR situation it is the time for Greece to design beautiful new drachma banknotes.