Monday, September 26, 2011

Latest Euro Bailout Plan

This one might have a chance to work. 1.7 trillion euros is real money:

The package is expected to involve a quadrupling - from the current projected level of 440bn euros - in the firepower of Europe's main bailout fund, the European Financial Stability Facility (EFSF).
This would be done by putting in place an arrangement that would allow the European Central Bank (ECB) to lend alongside the fund.
The EFSF would take on the main risk of lending to governments struggling to borrow from normal commercial sources - governments like Italy.
The political fallout remains to be seen, especially in Germany.


brent said...

In contrast to this presumably US-supported intervention via the IMF, I am interested to read Mélenchon's charge that the US is engaged in 'aggressive destabilization' of the Euro:
Can someone with more economics training that mine weigh in with some evaluation of this rather vehement accusation?

FrédéricLN said...

"A senior IMF official said Sunday that the ECB was the only player big enough to "scare" financial markets, putting further pressure on Europe.

There are differences in opinion over whether the ECB should commit more of its resources to helping euro zone countries and securing European banks."

But the ECB has very limited resources. If the ECB looses its money (and it would be lost indeed), the governments should fill the gaps… and they are over-indebted... As 16's customized graph put it in May 2010 :

Of course, the FED should be in the same situation. I have the feeling of a crazy gamers competition between Europe and the USA, each of them taking more and more speed towards the monetary canyon, each of them hoping the rest of the world will jump and save their currencies, just because they are needed on the market. Er — why? Or, how long will they be?

State bankruptcies are a good old feature of many governments, including France, Spain and Greece; currency devaluation was their nickname when currencies were fixed against some standard (gold, the US dollar, of the ECU for European States). We are discovering what "floating currencies on a globalized market" really mean: so far, a megaPonzi. We are discovering it day after day.

Anonymous said...

"The political fallout remains to be seen, especially in Germany"
Indeed see Die Welt and this video.