Europe: framework for the next developments

For The European Crisis To End, This Is What Now Needs To Happen

Simone Foxman

• Last week, European Central Bank President Mario Draghi laid out the framework for the next developments he wants to see in Europe. 
• Considering how important the ECB has been in slowing the crisis, it is likely that the ECB will get what most of what it wants. 
• Draghi's demands are just a few of the many steps European leaders will need to take in the medium-term in order to keep the monetary union afloat. 
• Depending on the time frame for these developments, we could see more sovereign debt restructurings and bailouts.

Here are the next steps to look for:

1. EU leaders need to sort out seniority problems in holdings of distressed sovereign debt.

2. Finalize plans to use European bailout funds, the EFSF and ESM, to purchase sovereign debt.

3. Decide on a new Greek bailout.

4. The ECB will restart purchases of sovereign bonds.

5. Create a European banking authority.

6. Institute a deposit guarantee system.

7. The ECB will announce plans to target sovereign yields.

8. Introduce some form of joint eurobonds.

9. Political union.

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