Spain has accepted bailout funds without any additional austerity strings attached. This is critical for Europe to create a firewall against Greece elections on June 17 and break the contagion that began at the start of May.
The move is a positive acknowledgement that Germany, in particular, is finally moving away from ideology and becoming more pragmatic in its dealings with the peripheral countries in the euro area. It also opens the door, along with what are likely to be more credible moves in the weeks to come, for additional easing by the European Central Bank.
Next up are talks about extending austerity deadlines for the peripheral countries. This would allow for some room to stimulate and break the vicious cycles emerging in particularly Southern Europe, where contracting economies are creating a shortfall in revenues.
We still have a long way to go, but this is an important first step in a more meaningful solution to Europe’s crisis. The costs of saving the euro are significantly less than failure, which is finally uniting the region. There is no exit ramp on this highway. We either move forward or crash.