Europe may have taken an historic step in its meeting on Thursday – it seems, for once, to have done more than “just kick the can down the road”. First, its leaders recognised that it is not just Greece that faces a problem; it is a European problem, which requires a European solution.
Second, the leaders recognised that Greece’s problems require a focus on debt sustainability – lowering the debt burden and increasing gross domestic product, and Europe is doing something about both.
The European Union has once again reiterated its resolve to a quick return to fiscal rectitude (at least for those countries not in crisis). Europe’s recovery, however, is still frail and excessively quick cutbacks will slow growth, and even risks a double-dip recession. Lower economic growth will be bad even from a narrow view of deficits and debt.