An Agenda for Europe’s Weary Magicians

BRUSSELS – Europe’s leaders will meet again at the end of June. The question they must answer this time is not whether they can rescue this or that country, but whether they can rescue the eurozone – if not the European Union in its current form.

To see why, just review the last 12 months. In July 2011, Europe’s leaders agreed on a (limited) restructuring of Greek debt, while at the same time making financial assistance nimbler and cheaper. A year later, Greece remains on knife-edge.

Throughout last autumn, they agonized over the rise of Spanish and Italian bond rates, until finally the European Central Bank decided to administer pain relief in the form of large-scale liquidity provision to banks. But, despite the arrival of new, reform-minded governments in both Italy and Spain, the relief proved short-lived.

Then, last December, they agreed on a new fiscal treaty, a more robust financial firewall, and new resources for the International Monetary Fund, so that it could intervene on a larger scale. But, by early spring, bond rates for Spain and Italy were again approaching unsustainable levels.