Euro zone enters dangerous week buoyed by ECB

Sun Sep 9, 2012 6:01am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Paul Taylor

PARIS (Reuters) - The euro zone enters a dangerous week, strewn with potential landmines, in a somewhat more optimistic mood after investors welcomed a European Central Bank plan to prevent a breakup of the single currency.

German judges, Dutch voters, IMF inspectors and Brussels regulators could all spring surprises that make it harder to resolve a sovereign debt crisis which is almost three years old and weighing on the world economy.

Wednesday is the main day to watch.

Germany's constitutional court rules then on the legality of the euro zone's permanent financial rescue fund, the European Commission unveils detailed plans for a euro zone banking union, and the Netherlands holds a cliff hanger general election.

Then European finance ministers meet in Cyprus from Friday to try to thrash out differences over banking supervision and possible extra aid for Spain, the zone's fourth biggest economy, and Greece, the problem country that first triggered the crisis.

Decisions on Spain and Greece are not likely until October, but the talks may point to whether Madrid will apply for European assistance, at the risk of unpalatable conditions and supervision, and whether EU and IMF inspectors are leaning towards allowing a vital aid installment to keep Athens afloat.

Europe has been holding its breath for two months for the German court ruling, a potential show-stopper.

All 20 legal experts polled by Reuters expect the judges to let the European Stability Mechanism and a European fiscal discipline pact go ahead, but most expect them to add tough conditions for future bailouts.   Continued...

 
A Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt September 6, 2012. REUTERS/Alex Domanski