April 26, 2018
World Latest News | Poll Questions | Eugene Cole | EMHS | Turkey Hunt

European leaders’ breakthrough defied expectations

By DAVID McHUGH, The Associated Press

BRUSSELS — Europe’s leaders finally rose to the challenge Friday, backing bold ideas to help weak countries and frail banks ravaged by a debt crisis that has crippled economic growth and threatened the global financial system.

Markets roared their approval after leaders of the 27 European Union countries agreed on an aggressive plan to fix the financial crisis.

For the first time in 19 summits since the start of the crisis, the EU leaders declared they would:

— Centralize regulation of European banks and, if necessary, bail them out directly, instead of funneling loans through governments that already have too much debt.

— Ease borrowing costs on Italy and Spain, the euro region’s third- and fourth-largest economies.

— Stop mandating painful budget cuts to every country in need of emergency financial aid.

—Tie their budgets, currency and governments more tightly.

The decisions made at the EU summit in Brussels won’t end the crisis that has gripped Europe for nearly three years. Plenty of questions remain about how the bank bailouts would work, whether there’s enough money committed to rescue banks and governments and whether impoverished, indebted Greece will be forced out of the 17-nation euro club.

But for EU leaders who have consistently underwhelmed their exasperated publics and nervous financial markets, Friday’s efforts marked a breakthrough.

The prime minister of Ireland — one of the five eurozone countries that have required emergency funds — said the plans marked a “seismic shift in European policy.” British Prime Minister David Cameron said that “for the first time in some time we have actually seen steps … to get ahead of the game.”

There was an immediate sign that Europe’s latest plan was easing fear in financial markets: The cost for the troubled government of Spain to borrow fell dramatically. The interest rate, or yield, on the country’s 10-year bonds fell by more than half a percentage point, to 6.34 percent.

The Dow Jones industrial average recorded its second-biggest gain of the year, and stocks advanced even further in Europe — in strong and weak countries alike. The benchmark stock index in Germany rose 4.3 percent, by far its best performance this year. Germany has the biggest economy in Europe, and a warm reaction there was a crucial sign of approval for the plan. Prices for oil and other commodities shot higher, another sign that the plan may remove a big barrier to a healthier economy.

Have feedback? Want to know more? Send us ideas for follow-up stories.

You may also like