Following an emergency meeting of Eurozone countries on July 21, a “Marshall Plan” for Europe was announced and a virtual European International Monetary Fund created.
A Marshall Plan for a peacetime crisis of Europe’s own making indicates just how wrong things went. Calling it a Marshall Plan in a draft documents made the actions seem aggressive and bold, exactly what Larry Summers recommended. But “Marshall Plan” was dropped from the official statement. That’s because it is far from a Marshall Plan. A Marshall Plan would have been great.
In the short term, it’s a bailout for Greece. In the long term, the plan ties the Eurozone closer together by strengthening the European Financial Stability Facility to avert future crises, hopefully. The proposed plan also makes it easier for Ireland, Greece, and Portugal to cut and pay their debts and restart growth, and provides a line of credit should countries like Italy and Spain get into trouble. The big question is where this growth will come from.
Eurozone parliaments will need to approve the above changes, so arguments won’t end today. We will continue to hear complaints about lazy southern Europeans holding themselves back from growth, and how they could supposedly profit from more cheap loans while Germany foots the bill and the risk. This is one reason Merkel didn’t go further. She lacks passion for Europe, which is problematic as long as she sticks around; “She’s killing my Europe,” remarked former Chancellor Helmut Kohl recently. That’s all brewing slowly. For now, building an IMF for the Eurozone just provides a bigger bucket to bail out good ship Europe when it’s a new hull and fresh sails that are needed for growth. It’s far from a Marshall Plan, but it’s enough for now.