World to Europe: Get it Together

Posted: Dec 07, 2011 12:22 PM

The verdict is in: The European Union's fiscal irresponsibility is negatively affecting the rest of the world, and people want it to stop.

From the Indian rupee to the fledgling tourist industry in the Atlantic island chain of Cape Verde, more hangs on this week's European Union summit than the future of the euro single currency project alone.

While no one believes the 27-nation bloc can find a quick fix to a debt mountain that was years in the making and which may stunt its economies for years to come, EU leaders are under growing pressure to show they can at least stop the rot.

"We're not expecting a sudden change in sentiment or a dramatic end to the problem at the EU summit," a senior Japanese policymaker told Reuters.

"But we also don't expect zero results. There should at least be some progress in how they hope to get their house in order," said the policymaker, who for reasons of diplomacy spoke on condition of anonymity.

And yet again, who is coming to the rescue? American taxpayers with downgrade Timothy Geithner at the helm.

Before this week's summit, U.S. Treasury Secretary Timothy Geithner was touring euro zone capitals with a message that it is time to act.

Speaking after talks in Berlin on Tuesday, Geithner urged reforms to "create the architecture of fiscal union", citing the "central role" to be played by the European Central Bank.

"There is concern among corporate leaders, both in the United States and Europe, about the uncertainty bred of lack of political consensus on how to move the economy forward," U.S. ambassador to the EU William Kennard said before the trip.

"And that certainly is weighing on the world economy. It's a factor both in Europe and the United States," he said, suggesting the two were "in the same boat" with over-borrowed economies and expensive welfare states.

Yet while the United States can turn to the Federal Reserve as a lender of last resort, euro zone states have no such recourse to the Frankfurt-based European Central Bank - and EU heavyweight Germany is determined to keep it that way.

Time to act? Who will be doing the acting? Americans or European leaders? It's time for Europe to pay "it's fair share."