Last week, the United States got its first genuinely good jobs report since January 2008: The Bureau of Labor Statistics reported an increase of 290,000 jobs in April. By the weekend, however, the economic forecast was once again cloudy, this time due to renewed concern over Greek debts. On Sunday evening came news that key European politicians and central bankers had ended over a year of inadequate action and finally come up with a two-pronged solution to the crisis. Large loans would be granted to ailing countries at favorable interest rates, and central banks would take coordinated action to buy European government bonds. The announcement of this plan has succeeded in alleviating the crisis atmosphere, but the underlying structure of the European monetary union remains rickety. More crises are certain to come until the Eurozone either breaks up or undertakes a much deeper program of integration.
The nature of the problem is multifaceted. The European plan most clearly deals with the Greek government’s ability to pay its debts in the short term, the most pressing issue at hand. But the interest rate Greece would need to pay in order to borrow money skyrocketed because of fears Greece would default. Higher interest payments, in turn, make a default more likely.
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