For more than a year, the euro zone's debt drama has been flaring up, fanned by financial challenges in Greece, Ireland and Portugal. With escalating market concerns about the potential fallout from defaults in Greece, the European Union government took a far-reaching reform step this past month, following an extraordinary summit in Brussels. The worsening risk of contagion to Spain and Italy, where banks hold substantial investments in Greece, made a comprehensive policy response crucial, given the large size of the two economies and their respective banking systems.
European policy makers presented a new set of proposals designed primarily to provide additional support for Greece and prevent contagion from spreading to the larger peripheral economies. While it may not prove sufficient to the task — indeed many observers view it as "kicking the can" down the road with key issues unresolved — it is more than many hoped for. Read the Article