ASSOCIATED PRESS: The leaders of the 17 countries that use the euro, plus six others, have tentatively agreed to a new treaty that enforces stricter budget rules seen as crucial to solving Europe’s debt crisis and holding the currency-bloc together.
The effort by Germany and France to persuade all 27 European Union countries to agree to treaty changes failed, in large part because of Britain’s refusal to give up some powers.
Following marathon all-night talks, the 23 decided to back a new treaty with strict oversight over national budgets, as they try to convince markets that the euro has a future. An agreement on fiscal discpline is considered a critical first step before the European Central Bank, the International Monetary Fund and others would commit more financial aid to help countries like Italy and Spain, which have large debts and unsustainable borrowing costs… (more)
EDITOR: And how do they plan to enforce such a treaty when governments are thrown out of office and people riot in the streets? This appears to be sheer nonsense and the path to European depression that could spread worldwide. What they should be doing (and perhaps are) is studying how to create a soft landing for endangered nations to return their own currencies and thus to control of their own exchange rates.
Forced to write down the value of their sovereign debt holdings, a number of major European banks are unlikely to pass the so-called stress test, including Germany’s no. 2 bank, the Commerzbank, and will be required to raise billions of Euros in new capital.
The situation is not looking good in Europe.
From a longterm geopolitical standpoint it would be a disaster if the Eurozone disintegrates; especially for the United States and other western countries. The EU is the West’s most strongest softpower tool. The thought of someday joining the EU entices countries to align themselves with Western interests, and eventually incorporates them into the Western block (ie. Western Europe, the US, Canada, etc.) as opposed to the Chinese, Russian, or Middle Eastern spheres of influence.
If the Eurozone (and yes, I realize we’re only talking about the currency) disintegrates, or the EU is in anyway discredited, it could permanently damage the EU’s prestige, and result in these countries (Turkey, Georgia, North Africa, Eastern Europe) either defecting to other spheres of influence, or trying to create their own (especially in the case of Turkey). This would set them on a course to become rivals to the West instead of being incorporate into it.
The problems facing the EU now are strictly short-middle term in nature. Yes, some countries will probably default, some banks will go under, and it will take a while for European economies to recover. But all that would happen anyway. If, on the other hand, the Eurozone disintegrate, the long term geopolitical ramifications for the US and other western countries could be disastrous.