Euro Uncertainty

The lead article in today’s New York Times, “Leaders Reach for Deal to Keep the Euro Intact,” describes a possible fix for the Euro to be discussed in a meeting today between the German Chancellor, Angela Merkel, and the French President, Nicolas Sarkozy. If they are able to resolve major differences, it will be submitted to a European Summit on Thursday.

The tentative package described would boost the bailout fund for countries in trouble, like Italy and Spain (Greece seems to have been written off at this point), and rely on the International Monetary Fund for backup. Other nations, presumably more fiscally secure, would be able to invest in the IMF fund to support the Euro.

The accord would also fundamentally change the European Union, giving oversight responsibilities to a central authority and perhaps limiting the amount of a deficit that any single nation could run.

France and Germany still have somewhat divergent approaches with the French most protective of their sovereignty and the Germans most opposed to quick fixes such as Eurobonds.

Where all this ends remains to be seen, but it does seem clear that whatever happens, it will impact the United States and our own economic recovery.