AMERICANS HAVE been justifiably transfixed by the outcome of the historic health-care case at the Supreme Court. But when it comes to the near-term economic and political outlook for the country, the ruling was not necessarily the most important event of the last few days. That honor may belong instead to the summit meeting of European leaders in Brussels. With unemployment in the 17 nations that use the euro as a common currency now at 11.1 percent, and the risk of global spillover effects mounting, the whole world’s prosperity depends on the ability of Europe’s fractious governments to manage the crisis and forge a long-term solution.
Alas, the meeting ended Friday with what was, by now, a familiar blend of tantalizing promises and ominously unresolved questions. First, the hopeful part: At the urging of France and Italy, Germany agreed to assure investors who buy Spain’s sovereign debt that they will get paid back on equal terms with the backers of European bailout funds — that is, Germany and its taxpayers. In addition, German Chancellor Angela Merkel allowed the $633 billion bailout fund known as the European Stability Mechanism to capitalize Spain’s troubled banks directly, rather than through the Spanish government. Finally, the Europeans agreed to set up a continent-wide bank supervision authority by the end of 2013, which also could help restore confidence in shaky financial institutions. Spain’s debt crisis represents the most critical short-term threat to Europe’s economic stability, and, taken together, these steps should help that country access the capital market at lower cost. Many expect the European Central Bank to cut interest rates later this week to help spur growth, as a reward of sorts for what was agreed.