After crisis fund, EU faces long-term battles

Luke Baker, Reuters, 10.05.2010

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The European Union made a bold, $1 trillion move to stave off the threat of wider debt-crisis contagion, but it went nowhere in resolving the deep political faultlines running through the 27-nation bloc.

Global financial markets and the euro single currency have responded positively to news of the special crisis mechanism, reached after 12 hours of talks in Brussels and involving the EU providing up to 500 billion euros in emergency funds and the IMF 250 billion euros more. [...]

"What they've put in place is a mechanism to react to a crisis," said Janis Emmanouilidis, a senior analyst at the European Policy Center, a Brussels think-tank.

"That does not mean that they have put in a place a system to coordinate economic policies in the long term, and that is far more important for long-term stability." [...]

"In the long term they need to decide what they are going to do about fiscal policy, taxation, labor markets, pensions systems," said Emmanouilidis, listing some of the more complex challenges the EU is going to have to tackle. "Those are steps you don't take in the midst of a crisis and we are still in the midst of a crisis."

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