Turning corners and breathing room versus no end in sight and kicking the can down the road

[koganbot]

David McHugh of the Associated Press ("After 3 bumpy years, Europe turns corner on crisis"):

The worst of Europe's financial crisis appears to be over.

European leaders have taken steps to ease the panic that has plagued the region for three turbulent years. Financial markets are no longer in a state of emergency over Europe's high government debts and weak banks. And this gives politicians from the 17 countries that use the euro breathing room to fix their remaining problems.

McHugh does go on to say that Europe's economy is likely to get worse before it gets better, then quotes Holger Schmieding, chief economist at Berenberg Bank in London, as saying "coming waves of turmoil will be less severe." (Article seems to be conflating the receding fear of imminent defaults and a Eurozone breakup, on the one hand, and nonimmediate prospects on the other.)

Tim Duy, on his blog Tim Duy's Fed Watch ("Europe's Back In The Spotlight"):

We are now looking at another year of dismal growth in the Eurozone. This crisis seems to have no end in sight.

To be sure, a little relief today as the Greek parliament pushed through the latest austerity package, throwing the bailout back to the Troika. But the relief was short-lived....

I am guessing that the Troika increasingly sees no way out for the Greek economy, at least under the current policy path. Does anyone really expect this to be anything more than just another effort to kick the can down the road? Everything to date has simply intensified what Ambrose Evans-Pritchard described as the "Greek death spiral."

...

Likewise, Spain too is an ongoing disaster. Unemployment is currently expected to peak at 26.6 percent next year, and this I suspect remains too optimistic. Yet the austerity continues. Moreover, the pain is clearly expanding deeper and deeper throughout the Eurozone.

To be precise, Duy isn't predicting a default or breakup, just another year that's worse than the last, with unemployment that's already depression-size in Greece and Spain getting worse.

As a nonexpert, my understanding is that the catastrophe was averted by the ECB's pledge to support Spanish and Italian bonds, if necessary. But according to Duy, Spain is getting no guarantees that the conditions of the support won't be onerous. So the ECB won't act (and Spain and Italy won't ask it to act) until the situation is extremely dangerous again, such as a Greek default followed by a panic run on Spain and Italy. Except that when this happens Europe will be in worse shape financially than it is now, potentially dragging the rest of us down with them. (Again, no claims here to know what I'm talking about.)

At the end of his article, McHugh writes:

Privately, European officials say the ECB's bond-buying plan has afforded them a crucial window of opportunity — a year, perhaps — to resolve their biggest challenges.

Much depends, they say, on what gets accomplished in that time.

So where's the damn corner you've just turned, if you're not done turning for another twelve months?