Markets fizzle as doubts grow about EU rescue package (+ analysis); Iraqi insurgents show strength as 119 die; Cameron is new British PM; BP to make second attempt to contain oil spill
Top of the Agenda: Doubts Remain on Euro Rescue
The global market rally that followed the announcement of a nearly $1 trillion aid package for heavily indebted European countries fizzled (NYT) as analysts pondered the package's long-term implications. Some analysts doubt the wisdom of solving a debt crisis by taking on more debt. There is also the problem of moral hazard--that other countries may continue to spend recklessly because they expect to be rescued. The European central government also needs to invent new structures to administer the aid, which could prove politically unsustainable. Countries receiving support do not want other countries to permanently set their economic policies, while voters in countries giving support to do not want to financially support other countries.
The European Central Bank's decision to purchase debt from eurozone countries also raises questions about the bank's independence in setting monetary policy (WSJ).
Analysis:
In the New York Times, Roger Cohen says the European Union will fester, partly because Germany has turned away from Europe.
CFR's Marc Levinson says the eurozone will prevail, because the region has benefitted enormously from European countries joining the union.
In the Financial Times, Gideon Rachman says European countries are not prepared for the draconian measures needed to bring their budgets in line.
Background:
This CFR Backgrounder profiles five countries in the eurozone with shaky fiscal positions.
ELSEWHERE:
Iraqi Attacks Show Militant Strength
BP Wrestles with Oil Solution, Hearings
Brown Quits, Cameron new British PM
This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.
NB: Apologies but technical issues have delayed us posting the Brief today, and what's more there are no Pacific Rim stories. Back on schedule tomorrow.