The choice facing European leaders can be boiled down to five words: More Europe? Or less Europe?

A passenger waits on a metro train platform near a Greek euro currency advertisment in Athens May 24. (Kostas Tsironis/BLOOMBERG)

No one is really talking about the "less Europe" option, but the political betting market InTrade currently gives 40 percent odds to one or more countries leaving the euro by the end of the year. But the "less Europe" doesn't need a plan: It's just what happens if the "more Europe" option fails.

The difficulty, of course, is how do you get "more Europe" without "too much Europe"? The currency zone's struggling economies want more help, but they don't want to cede all control over their budgets, their banks, and their firstborn. The stronger countries want more control, but they don't want to be on the hook for every bad decision made by an Italian bureaucrat. That's the essential balancing act of the crisis: If you don't get enough Europe, the economic stresses tear the currency union apart. If you get too much, the political revolt threatens to tear the currency union apart, as we're seeing in Greece.

So that's the question: How do you get "just enough" Europe?

Programming note: You'll notice that we've changed the "top stories" section in Wonkbook. Rather than linking to the five or six key stories of the day, it's a more thematic dive into the key story of the day. Today, for instance, it's a panoramic look at what's going down in Europe, and what it means for us. As always, you can send your feedback to wonkbook at gmail dot com.

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Top story: Europe, Europe, Europe -- oh, and the U.S.

The G7 is hitting the panic button on the euro zone. "Finance chiefs of the Group of Seven leading industrialized powers will hold emergency talks on the euro zone debt crisis on Tuesday in a sign of heightened global alarm about the threat posed by strains inside the 17-nation monetary union. With Greece, Ireland and Portugal all under international bailout programmes, financial markets are anxious about the risks from a Spanish banking crisis and fret a Greek election on June 17 could lead Athens to leave the single currency and precipitate yet more economic turbulence. 'We have reached a point where we need to have a common understanding about the problems we are facing,' Japanese Finance Minister Jun Azumi told reporters." Andreas Rinke and Leika Kihara in Reuters.

Wonkbook real talk: Because nothing persuades the markets that everything is going to be okay quite like an emergency meeting of the legendarily effective G7.

Realer talk: After writing that sentence, I saw this FT article suggesting the G7 meeting is, indeed, calming the markets, Shows what I know.

Germany's big idea: Could Europe create a 'bad bank' for its bad debts? "Pressed by a banking crisis and turmoil in the markets, Germany has indicated that it is prepared to accept a grand bargain that would provide greater support for its most indebted euro zone partners in exchange for more centralized control over government spending in Europe. The German chancellor, Angela Merkel, said that finding the way to 'more Europe, not less' was the next task for Europe’s leaders. 'The world wants to know how we expect the political union to complement the currency union,' Ms. Merkel said at a news conference here Monday with José Manuel Barroso, the president of the European Commission. 'We have to find an answer in the foreseeable future.' German officials remain adamant that they are not talking about euro bonds, or jointly issued debt...More likely is a plan to combine much of Europe’s bad debt into a single fund with the idea of paying it off over 25 years, an idea gaining traction in Germany as an alternative to euro bonds, officials say." Nicholas Kulish in The New York Times.

Germany also wants EU supervision of the country's biggest banks. "German Chancellor Angela Merkel on Monday suggested that European Union leaders consider putting the largest banks in the 27-nation bloc under direct European supervision, opening the door to more centralized oversight of the region's financial sector. The German proposal, which echoes a similar call from European Central Bank President Mario Draghi last week, comes as the region's leaders are trying to rebuild confidence in Europe's battered banking sector. In contrast to Mr. Draghi and the European Commission, however, the German leader stopped short of endorsing more ambitious plans to safeguard the region's financial system by creating a 'banking union.' Under that idea, which was presented last week by the commission, there would be a Europe-wide depository insurance and other financial backstops." William Boston in The Wall Street Journal.

Hedge funds are betting big against the euro:

Weird polling in Greece. "The Public Issue poll, published on Friday in the Kathimerini, gives Syriza 31.5 percent of the vote, 1.5 percentage points higher than last week. New Democracy (ND) is steady at 25.5 per cent, while Pasok’s share has fallen 2 percentage points to 13.5 per cent...Translated into parliamentary seats, that means 134 for Syriza (the largest party gets an extra 50 seats), then 68 for ND...But most Greeks apparently don’t expect Syriza to win. The Public Issue poll shows that 58 per cent think ND will come first while only 34 per cent expect the leftists to do so. Masa Serderevic in the Financial Times .

@BCAppelbaum: Maybe Europe could unite under the Hapsburgs. Are there still Hapsburgs?

Europe's crisis is slowing U.S. sales. "In the technology industry, one of the most exposed to Europe and an engine of the American recovery, Cisco, Dell and NetApp have all recently pointed to unexpected weakness in European sales. Other areas with major exposure to the Continent, including automakers and industrial companies, are beginning to voice similar cautions...Corporate profits have been one of the brightest spots in the American economy, but the decline in European revenues is part of the reason that analysts have recently ratcheted down their expectations for profit growth in the second quarter. In the case of technology companies, analysts say they believe that about a third of all revenue comes from Europe." Nathaniel Popper in The New York Times.

The bright spot: Commodity prices, including oil, are dropping over economic anxiety. "From the copper mines in Chile to the corn farms of North Dakota to the oil fields of the Middle East, commodity prices have started to crumble. The prices of metals, energy and agricultural goods have dropped as anxiety has ratcheted up over Europe’s currency crisis, China’s slowing growth and the stalling U.S. economy. On Friday, copper futures fell to their lowest level of 2012. On Monday, cotton fell to a 31-month low. Sugar hit a 21-month low. Last week, the price of OPEC’s basket of crude oil grades slipped below $100 a barrel for the first time in nearly eight months...The recent drop in commodity prices could open up more room for fiscal or monetary stimulus without worries about igniting inflation...For commodities such as oil that are priced in dollars, the weakening euro has kept prices high in Europe." Steven Mufson in The Washington Post.

The ECB intends to keep doing a terrible job for at least a little while longer. "The European Central Bank will meet Wednesday amid growing signs of economic distress in the euro zone and louder calls for the bank to cut rates as uncertainties build around the currency bloc. Although a rate cut this week can't be ruled out entirely, the central bank is likely to hold off this time while potentially starting to prepare the ground for a rate cut at its next meeting in July or later...At a recent European Union summit, the ECB's independence came openly into question, with some leaders putting pressure on the central bank to do more to support growth and help restore the health of the region's banks...The Frankfurt-based central bank will this week release its new quarterly forecast for gross domestic product and inflation for both this year and next. At its last forecast in March, the ECB lowered its growth forecast for this year to minus 0.1% for this year and 1.1% in 2013." Todd Buell in The Wall Street Journal.

ALTMAN: Europe needs the tools to battle its crisis. "The reason markets are battering the euro zone is that its hesitant leaders have not developed the tools for countering such pressures. The U.S. response to the 2008 credit market collapse is instructive. The Federal Reserve and Treasury took a series of huge and swift steps to avert a systemic meltdown. The Fed provided an astonishing $13 trillion of support for the credit system, including special facilities for money market funds, consumer finance, commercial paper and other sectors. Treasury implemented the $700 billion Troubled Assets Relief Program, which infused equity into countless banks to stabilize them. The euro-zone leaders have discussed implementing comparable rescue capabilities. But, as yet, they have not fully designed or structured them. Why they haven’t done this is mystifying. They’d better go on with it right now." Roger Altman in The Washington Post.

Reminder: Much of what the Fed did in 2008 and 2009 was not clearly within its mandate. Bernanke put "saving the American economy" ahead of "no one has specifically told me I can do this." The basic idea was better to ask forgiveness from a functioning economy than permission from an anarchic, Mad Max-style dystopia. Europe would be in much better if Ben Bernanke were running its central bank.

Top op-eds

1) KLEIN: Romney may be the best candidate to avoid economic turmoil in 2013. "Even if you disagree with every one of Mitt Romney’s policies, there’s a chance he’s still the best candidate to lift the economy in 2013. That’s not because he has business experience. For all his bluster about the lessons taught by the private sector, his agenda is indistinguishable from that of career politician Paul Ryan. Nor is it because he’s demonstrated some special knowledge of what it takes to create jobs. Job growth in Massachusetts was notably slow under Romney’s tenure. It’s because if Romney is elected, Republicans won’t choose to crash the economy in 2013...There’s a good chance that a Romney administration would extend both Bush and Obama’s tax cuts and delay the scheduled spending cuts. Congress would raise the debt ceiling after Romney promised congressional Republicans that he’d sign some variant of Paul Ryan’s budget as soon as it’s sent to him." Ezra Klein in The Washington Post.

2) VOLCKER: Global financial reform is needed. "Nowadays there is ample evidence that financial systems, whether in Asia in the 1990’s or a decade later in the United States and Europe, are vulnerable to breakdowns. The cost in interrupted growth and unemployment has been intolerably large. But, in the absence of international consensus on some key points, reform will be greatly weakened, if not aborted. The freedom of money, financial markets, and people to move - and thus to escape regulation and taxation - might be an acceptable, even constructive, brake on excessive official intervention, but not if a deregulatory race to the bottom prevents adoption of needed ethical and prudential standards...Strict uniformity of regulatory practices may not be necessary. For example, the UK and the US may be adopting approaches that differ with respect to protecting commercial banks from more speculative, proprietary trading...But other jurisdictions should not act to undercut the restrictions imposed by home authorities." Paul Volcker in Project Syndicate.

3) GREER: The Center for Medicare and Medicaid Innovation should be abolished. "Early this year, I was briefly involved with one of the Affordable Care Act's bureaucracies called the Center for Medicare and Medicaid Innovation, or CMMI. Despite its lofty ideals, it is one more pork program and venue for political cronyism, as I learned firsthand. The innovation center is supposed to test better ways to deliver and pay for health care than the current fee-for-service system, and the outfit will spend $10 billion over the next decade on awards, grants and contracts...But I found there are few safeguards and little transparency in practice...Even if the innovation center's grants were chosen via a squeaky-clean peer-review system and awarded solely on merit, they would still be a waste of taxpayer money because Medicare should not be straying from its core competencies into areas like job creation. Congress ought to dismantle and defund the program if CMMI survives the Supreme Court ruling on the Affordable Care Act." Steven Greer in The Wall Street Journal.

4) BARRO: The recovery isn't happening fast enough. "The average annual growth rate of U.S. GDP since 1948 has been 3.1%. In the recession starting in the third quarter of 2007 and ending in the second quarter of 2009, GDP fell by nearly 5%. But this decline is 10% when gauged relative to trend--that is, after factoring in normal growth. To make up for this shortfall, the subsequent recovery has to attain growth rates averaging above 3% for several years. This is not an unreasonable expectation. For instance, the GDP growth rate averaged 4.3% per year from 1982 to 1989 following the deep recession of the early 1980s. Yet in the current 'recovery,' beginning in the second quarter of 2009, growth has averaged only 2.4% per year, and just 1.8% for the first quarter of 2012. This low growth means that the U.S. economy has actually been falling further and further behind the normal trend. Therefore, it is not a recovery at all." Robert Barro in The Wall Street Journal.

5) NOCERA: Unions are needed to fight inequality. "In the late-1970s, union membership began falling off a cliff, brought on by a variety of factors, including jobs moving offshore and big labor’s unsavory reputation. Government didn’t help either: Ronald Reagan’s firing of the air traffic controllers in 1981 sent an unmistakable signal that companies could run roughshod over federal laws intended to protect unions -- which they’ve done ever since. The result is that today unions represent 12 percent of the work force. 'Draw one line on a graph charting the decline in union membership, then superimpose a second line charting the decline in middle-class income share,' writes Noah, 'and you will find that the two lines are nearly identical.' Richard Freeman, a Harvard economist, has estimated that the decline of unions explains about 20 percent of the income gap...If liberals really want to reverse income inequality, they should think seriously about rejoining labor’s side." Joe Nocera in The New York Times.

80s nostalgia interlude: Dinosaur Jr. play "Get Me" live on The Late Show.

Got tips, additions, or comments? E-mail me.

Still to come: Factory orders are down; cost shifting billing is on the rise; the Paycheck Fairness Act is on its way to defeat; net metering draws a backlash; and a cat really likes the sofa.


Many companies seeking to use the JOBS Act don't have many jobs. "The JOBS Act was supposed to be about clearing away regulation to help young companies create jobs. Just eight weeks after its passage, however, more than a dozen of the companies seeking to use its looser rules for going public aren't the type of high-tech growth companies lawmakers had in mind. 'Special-purpose acquisition companies' and 'blank check' companies, basically empty shells with almost no employees that are used in mergers or as a backdoor route to U.S. stock listings, have been quick to identify themselves in regulatory filings as 'emerging growth companies.' The new law uses that phrase to describe which companies--once they have applied to go public--should be exempt from some financial-reporting and corporate-governance requirements...The JOBS Act, whose initials stand for Jump-Start Our Business Start-Ups, went into effect immediately after it was passed on April 5, leaving the SEC to decide on the fly what companies it covered." Emily Chasan in The Wall Street Journal.

Financial regulator Gary Gensler is hanging in limbo. "The White House has allowed the term of the top US derivatives regulator to expire amid critiques from both political parties over attempts to shape the future of the $648tn swaps industry. Gary Gensler, chairman of the Commodity Futures Trading Commission, quietly saw his official term lapse on April 13...Congressional aides who have been briefed on the renomination discussions as well as industry lobbyists who meet with Mr Gensler’s staff argue that the lack of explicit White House support could undermine the derivatives regulator. Mr Gensler has disagreed with the Treasury department on some swaps rules, for example. The Obama administration is likely to delay reappointing Mr Gensler due to the impending November presidential election and uncertainty over whether he could garner enough support from lawmakers, agency observers reckon." Shahien Nasiripour in The Financial Times.

@TonyFratto: I want to start my own credit rating agency and then just downgrade countries and companies.

First time interlude: Cooper hears for the first time.

Health Care

Mayor Mike Bloomberg, public health autocrat: "Some of Bloomberg’s ideas have proved remarkably effective in making New Yorkers healthier and become models for national policy. Some have flopped, showing little public health impact or running into trouble even getting off the ground. From smoking to soda bans, here’s a quick tour through Mayor Mike Bloomberg’s public health crusade." Sarah Kliff in the Washington Post.

@mattyglesias: If only Mike Bloomberg would apply his insights about soda to the problems with a poorly supervised banking sector.

A hospital billing practice that shifts costs is on the rise. "A hospital billing practice that can leave Medicare beneficiaries on the hook for large medical costs is becoming increasingly common, according to a report released in Health Affairs on Monday. Three researchers from Brown University examined how frequently patients are placed on 'observation status,' meaning they’re getting treatment in a hospital but are not technically admitted. That means their care is covered by Medicare Part B rather than Part A, which can leave patients responsible for a greater share of their costs. But patients who are not admitted to a hospital and then go to a nursing home take the biggest hit, because Medicare covers nursing home care for beneficiaries only after they’ve been hospitalized...From 2007 to 2009, the researchers found a 25 percent increase in the number of observation stays based on a review of Medicare claims data, with more than 900,000 beneficiaries being placed on observation status in 2009." J. Lester Feder in Politico.

@DLeonhardt: Health isn't driven mostly by health care. MT @Atul_Gawande Biggest predictor of infant/maternal mortality across 136 nations: Corruption.

Domestic Policy

The Senate is set to begin debate on the farm bill. "The Senate is poised to begin debate Tuesday on a 2013 farm bill that is likely to take up the rest of June. The bill would put the United States on track to spend $969 billion over 10 years on farm and nutrition programs, but supporters noted that this is a $23.6 billion cut compared to simply extending current programs...The bill eliminates direct farm subsidies but creates new crop insurance aid that is too generous for some deficit hawks and too stingy in the view of Southern farmers. It places new restrictions on food stamps, prompting some critics -- including New York Democratic Sen. Kirsten Gillibrand -- to argue it will hurt the poor just as the economy is slowing...The draft Senate bill enjoys enough bipartisan support to muster the 60 votes needed to overcome any Senate filibuster, say supporters who hope passage will spur the House to produce its own version." Erik Wasson in The Hill.

The Paycheck Fairness Act is expected to be defeated today. "Democrats will bring to the Senate floor on Tuesday the Paycheck Fairness Act, a bill that is supposed to help close the wage gap between men and women. The measure will fail, as intended, because at its core it is not so much a legislative vehicle as a political one intended to embarrass Republicans and help President Obama and congressional Democrats with female voters in November. The bill, which needs 60 votes to clear procedural hurdles, faces almost certain defeat because most Republicans plan to vote against it. But Obama and Senate Democrats are hoping those votes will give them the opportunity to paint congressional Republicans as hostile to women’s interests...The paycheck bill would bar companies from retaliating against workers who inquire about pay disparities and permit employees to sue for punitive damages if they find evidence of broad differences in compensation between male and female workers." Ed O'Keefe in The Washington Post.

Cities are cutting public transportation. "Public transport plays a central role in local economies, but tight budgets and hefty pension obligations are pressuring transit systems, just as the economic recession and sluggish recovery have depressed the state sales-tax receipts that fund many transit systems around the country. Nationwide, nearly 80% of transit agencies raised fares, cut service or planned to do so last year because of flat or declining government funding, according to a survey of 117 transit agencies by the American Public Transportation Association, a trade group for the public-transport industry that has lobbied for an increase in federal funding. The transportation bill currently in Congress would keep transit funding at about $10 billion a year over the next two years, said Mantill Williams, a spokesman for APTA. In Boston, the board of the Massachusetts Bay Transportation Authority voted in April to raise fares by an average of 23% and cut bus and rail service." Kris Maher in The Wall Street Journal.

Lobbyists want mandatory ethics training for lobbyists. "An association of Washington lobbyists is asking Congress to give teeth to a provision from a 2007 reform law that would make ethics training mandatory for lobbyists. Howard Marlowe, president of the American League of Lobbyists (ALL), has been making the rounds on Capitol Hill asking lawmakers to grant statutory power to a non-binding resolution in the Honest Leadership and Open Government Act of 2007. Section 214 of that law says it is the sense of Congress that lobbyists should create 'multiple self-regulatory organizations' to help develop fee standards, ethics training and educational materials for the public on how to hire a lobbyist, among other things. Marlowe said his group wants Congress to sign off on the ethics-training part of the law...The lobbyist group is also seeking oversight hearings from Congress on the Lobbying Disclosure Act (LDA). Marlowe and others have lobbied for lowering the threshold that requires a person to register as a lobbyist." Kevin Bogardus in The Hill.

Cats being silly interlude: Maru plays on the sofa.


Net metering is raising concerns over fairness. "The net metering benefit, which is available to residential and commercial customers with renewable energy systems in more than 40 states and has helped spur a boom in solar installations, is at the heart of a battle. Utilities, consumer advocates and renewable energy developers across the country are fighting over how much financial help to give to solar power and, to a lesser extent, other technologies. Regulators are in the middle, weighing the societal benefits of renewables as well as how best to spread the costs. Net metering has been so popular that several states are rapidly approaching regulatory limits on how many systems are eligible, meaning new customers have no assurance they can reap the same rewards. The solar industry, which is growing in size and influence, has been pressing to raise those limits to continue to encourage rooftop installations, while the utilities have generally been opposed." Diane Cardwell in The New York Times.

@WestWingReport: Big reason gas prices are falling is the same reason they collapsed in 2008-09 under Bush (after rising 387%) - weak economy

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.