Over the next few weeks, European leaders have a big task ahead of them. They have to begin fleshing out that big bailout plan unveiled to so much fanfare in Brussels this week. The plan represents the most comprehensive effort so far to resolve Europe's grinding debt problems, which have done so much damage to the world's financial markets this year, but some issues may require a global effort to solve.
Even people who don't think too much of the bailout plan say it represents progress of a sort. Sony Kapoor, managing director of the consulting firm Re-define, says Europe has been muddling along for a long time — like a tanker headed in the wrong direction.
"Finally, belatedly, they have recognized what the main problems are and the tanker has been slowly been turned toward the right direction," he says.
That's not to say the plan goes far enough, he says. This crisis has its roots in Greece's massive debt load. The plan tries to address that by forcing banks and other investors to take big losses on the Greek bonds they hold. But economist Simon Tilford, of the Center for European Reform, says that won't make enough of a dent in Greece's debts.
"That won't guarantee the Greek government access to the financial markets, so they haven't actually solved the Greek issue," Tilford says.
The plan also calls for bolstering the stabilization fund that's supposed to help prop up Europe's weakest economies. Officials hope that outside investors will be willing to put money in the fund.
"The question is who has the ability to provide this," says Arvind Subramanian with the Peterson Institute for International Economics. "To some extent, the oil exporters can, but really the only country with that kind of muscle, economic cash, really, is China,"
Subramanian says so far, China has been noncommittal about investing in the fund.
"But I think at some point, China will have to realize there is self-interest in this, because China doesn't want to see Europe falling off the cliff," he says. "So I think China will, for a variety of reasons, have to face up to this international responsibility."
Subramanian says China can use this crisis to extract concessions from the West, like greater voting power in the International Monetary Fund. Kapoor says the real problem with the plan is that it doesn't address Europe's stagnant growth rate.
"In a situation where you are highly indebted and both your private and public balance sheets look bad, the most terrible thing that can happen is you stop growing and what can be even worse is you head into a recession – which is where we are headed," Kapoor says.
Kapoor says it's depressing that Europe, with its shared culture and values, can't sit down and address its problems.
"If this is the best that they can do, what hope is there of sitting the Indians and China and the United States and the Europes of the world around the table and solving some of the major economic and environmental problems that confront us globally?" he says. "I think it's a very scary prospect that keeps me up at night."
But, Kapoor says, this week's agreement is at least a sign that Europeans leaders understand the seriousness of the challenges they face.
Correction: December 16, 2011 12:00 am — The audio of this story, as did a previous Web version of this story, incorrectly identifies Simon Tilford as Simon Tilwell.