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World's Economy Still Focused on Europe

Bargain hunters helped to lift U.S. stocks higher Friday after Wall Street's big sell-off a day earlier.  But European and Asian stocks ended the week sharply lower despite developments in Greece that may have averted a potentially disruptive exit from the Eurozone. Financial markets remain deeply concerned about the ability of the world's political leaders to come to grips with a weakening global economy.

New reports out Friday show German business confidence declined in June.

Chinese manufacturing continues to shrink.

And the number of Americans applying for unemployment benefits hit a nine-month high.

Expectations were naturally high on Friday as leaders of France, Germany, Italy and Spain met in Rome.  Despite announcing general agreement on a $160 billion plan to revive economic growth, analysts say fixing what ails Europe will require more than money.

Thanos Veremis is a Greek political historian:

"If you want to save the euro, you have to do much more than just hand out money around, you need to create a ministry of the exchequer - or whatever you call it in England - or a minister of finance or a common fiscal policy, which we don't have in Europe," said Veremis.

Structural reforms from a European banking consortium to jointly issued euro-bonds are just a few of the ideas gaining momentum - especially after formation of a new coalition government in Greece failed to ease concerns about the deepening fiscal crisis.  

With the world's major economies slowing down, some investors were eager to see stimulative action from the U.S.  

But financial markets were ultimately disappointed Wednesday after U.S. central bank chairman Ben Bernanke announced only the extension of an earlier program to maintain interest rates at record lows.

Experts say the Fed still has a few options, including expanding its balance sheet to make more U.S. dollars available, but market strategist Stephen Wood says the Federal Reserve may be conserving its fire power.
"I think in some ways the Federal Reserve, like the European Central Bank - they want to keep a little bit of their powder dry just in case the financial situation in Europe gets out of control."

Despite agreement on the need to bolster economic growth, European leaders remain at odds over how to do it.

Among the thorny issues likely to come up at the European Summit in Brussels on Thursday, June 28 is a proposal to use Europe's existing bailout funds to buy debt from ailing economies in Spain, Italy and Greece.

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