Now, with borrowing costs for Spain and Italy edging down from the danger zone and Greece still entangled in negotiations with its international bailout monitors, the big decisions have been put off. European leaders plan to begin discussing a common euro-zone budget and to talk more about a shared supervisor for European banks — the first step toward a banking union. But no major decisions are expected by the end of the two-day meeting.
European leaders are gambling that Italy’s and Spain’s borrowing costs will not spike again during the next several weeks. This time, though, the countries have some recourse: The European Central Bank has pledged to intervene to keep their borrowing costs at a sustainable level provided they are bound by a bailout program that includes strict oversight of sovereign budget decisions.
That has some European leaders crowing that they are close to containing their problems for good, if not fixing them completely.
“We are close, very close, to an end to the euro-zone crisis,” French President Francois Hollande said Wednesday in an interview in Paris with six European newspapers.
The mere possibility of help from the deep-pocketed ECB drove down Spanish borrowing rates after the decision was announced in early September. On Wednesday, 10-year Spanish bonds were trading at rates of about 5.6 percent, significantly lower than the 6 percent that many economists see as the danger-zone mark.
“Words from the ECB are very important words,” said Karel Lannoo, head of the Center for European Policy Studies, a Brussels think tank. But, he added, “the heat is off. And if there’s no heat, policymakers don’t do anything.”
Top European Union officials acknowledge that the calmer atmosphere may not be conducive to action.
“We want to rejuvenate . . . the sense of urgency,” a senior official said this week in Brussels, speaking to reporters under a ground rule of anonymity.
Impact on U.S. elections
The sense that Europe’s economy is in a holding pattern may take its problems out of contention as an election issue in the United States in the final weeks of campaigning there. So long as European leaders do nothing to shock markets, U.S. investors — as well as voters worried about their retirement plans and jobs — may stay focused on the domestic economy, analysts say.