Solutions Versus First Aid For European Crisis

This article in the Financial Times suggests that despite new efforts to reduce the risk of panic, a long term solution is needed. It argues that there is a triple shock risk in Europe. The aftershock to the financial crisis may prove worse than the original shock; the sovereign crisis includes Europe's third largest economy, and there is risk to the European Project that poses unknown political risks.

Germany will do all that is necessary to maintain the system unless it threatens its solvency. Some have even suggested that this threat to Germany is real. Financial adjustments must be made that do not prevent needed fiscal adjustments, but austerity cannot be imposed that prevent fiscal recovery.