by Stephen McPhie, CA
Partner, RSD Solutions Inc.
So the markets heaved a big sigh of relief as Germany’s parliament today (Sept. 29) approved increased powers for the European bail out fund. Armageddon postponed. But perhaps not for long. This is the last proposal that has now been approved by most of the 17 Eurozone members. However, it has been recognized that it is grossly inadequate and more and greater contributions are proposed. The trouble is that the Euro was born as a political animal and was, as we now know (if we did not realize it before), flawed. In its early days, France and Germany flouted the stability pact rules with impunity. After all, was Luxemburg going to insist on those two countries being fined? Since then, Italy, Greece and others have not, to put it mildly, observed anything like prudent fiscal policies.
For some time now, markets have been way ahead of the politicians who are floundering around, partly in denial and partly trying to protect their own jobs and partly wondering how to recognize which is the front end of a cow.
Meanwhile options are becoming more and more limited. The politicians will muddle through to a solution in the end but the real question is how long will it take to get there and how much damage will be done before they get there.
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