The euro deal

No big bazooka


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Readers' comments


mandy jean cole

I got a great idea lads ?? (The Italian Job) lets loan our club member Greece say £100 billion and when they have spent that( and refuse to pay it back)..we will offer them a devious olive branch and tell them that we will write off 50% of the debt (but in reality it will be 100%) if they tow the austerity line(that we of course will be monitoring ) the ECB can then print say a trillion euros to start with and see what the problem looks like in 6 months time, Sorry I forgot to mention about a couple of new members Romania and Bulgaria waiting to join the euro zone social club in a couple years which will make the Greek debt problem seem like just a bad night at your local casino..And of course i have yet to work out the fine details of whose going to pay for all this?...........Well its either that or we shut the club down..what do yo think ? MJC

lord zoth

It seems wrong to me when the Euro-crisis is portrayed as a matter of staving off impending disaster affecting all. Surely the issue must be "who gets hit the hardest and who does not?".

Unsurprisingly, those arguing within a classic discourse (like The Economist) do not favor market intervention, and frets e.g. that the leverage envisioned will cause the CDS market to freeze. But so what? Who does THAT hurt...the most.

The cure-all-silver-bullet of running the ECB printing press and having infaltion deal with the issue may be sound to some but most working class people will take a hit... so again, Cui Bono?

Simply arguing that "what is good for General Motors is good for the US of A" doesnt cut it anymore, guys.


As an Italian, I am dismayed to read about the considerations and tools being bandied about. The Right-wingers Sarkozy and Merkel, but also Van Rompuy and others, are still covering for Berlusconi.
Instead, our entire economy is to be humiliated with the idea of massive bond purchases - which the vast majority of our business press and community have asked the government to ask the ECB to discontinue. These purchases do not help the Italian people; they only help Silvio Berlusconi and his lame duck government.

Mr. Berlusconi lost four referenda last June by votes of 95% to 5%. There is no political revival after such a defeat. The problem here not a question of Italian lying or Silvio lying. The problem is that this government has no authority, mandate, real power or ability to make any reforms. So they must scramble to find money only in truly damaging ways to our otherwise sound (but handicapped) economy.

Whatever Sarkozy and Merkel are doing, if they leave Berlusconi in power - by covering for him with bond purchases - they are not helping Italy: they are only liquidating Italy.

I would put this all down to a Franco-German plot to destroy their primary export rival - except that even if it were true, Paris and Berlin will be shooting themselves in the foot.

Mr. Berlusconi is like so many other Turbo-Capitalists around the world. He is not governing and has not governed our country for over a decade. He has been sacking our country for a decade. Such a commander of the immense political and economic machine he has put together cannot "reform" anything - he can only share some of his power with outside, foreign powers to save himself at home. Now, to make good on "promises" he must find different and better ways to sack Italy. And in the meantime we citizens are forced to move abroad to avoid our financial liquidation.

A friend of mine, professor of Sociology, said to me yesterday - "It becomes imperative for us to avoid any official contact with other citizens - which in the current context becomes a pretext to issue mega-fines and provide more financial resources to our thieving government."

What is going on here is not reform. It is the liquidation of civil society.

Mitesh Sharma

Banker runs the world economy, when first time i heard, thought came in mind, how can it be. But now it seems like everything revolve around money, one country can print it when they need it. In real world we are just considering a piece of paper as more valuable than any life. Crisis is like a stress test which help people realize that they need to make new rule, to follow old one. And the cycle goes like this.
Here after coming to conclusion that private investors are ready to lose half of their money in Greek bond, what will really happen to CDS. Do investors really need to lose hope in them. I strongly think that we should always decide all possible cases of default in advance for Swaps to protect all investors, but is it really possible? Giving all power to politicians and bankers, i don't think so.


hello. living in America, understanding why the public sector is worth more than the private sector: creates mental illness. Greek austerity would be manageable at 80%, if some of the good banks failed. is that why the Euro must go forward? is a common currency really worth all this harm? will fiat CDS money insure future poor judgement? how is default on half the government bonds supposed to return confidence? i wanted to celebrate an end to a protracted financial gloom, that for two years has been depressing the world. instead i ask, is the Euro a vehicle to multiply real money, or fiat money? the established securities were implemented for taking a drink of water, and that is no longer enough. is a unified currency a step in the wrong direction?

Moran ya Simba

The ECB needs a freer hand. Not just to print money like a drunk sailor spends it. But we do need this tool, together with other efforts.

Papa N

"The euro’s crisis boils down to this: national treasuries do not have enough spare cash both to guarantee outstanding debt and maintain their own credit ratings. Even mighty Germany cannot stand alone behind the whole euro zone."

So speaketh the rally though!

Tale Twister

It'll just be another long viscous cycle before Recession 3..We mush not forget what Newton taught us, u cant have any action good or bad without an opposite reaction...We can just hope that the reaction, during Recession 3 wont be worse...

Steve Thompson

Europe's debt problems, outside of Italy, are but a tiny fraction of the world's overall flood of sovereign debt. Here is an article that discusses the projected growth in sovereign debt over the next 5 years:

The IMF has calculated that the average gross general government debt-to-GDP ratio for the world's advanced economies will rise from 91 percent at the end of 2009 to 110 percent in 2015, an increase of 37 percentage points since the beginning of the Great Recession. When the debt-to-GDP ratio rises above 100 percent, many consider this to be the default danger zone.

Unless governments stop spending and then taxing, we are in for a world of pain.


Most of the things agreed were known before the summit and the details have yet to be hammered out.

The root of the current problems in the Euro Zone can be traced back to bad politics taking precedence over sound economics and a flawed assumption, i.e.
the economies of member states would converge.

Even though safeguards were set, such as, national fiscal deficits should not exceed 3% of GDP and the Stability and Growth Pact to ensure sound fiscal policies. These safeguards were ignored by everyone.

The plan to cut Greek debt may sound ambitious. But it will only reduce debt-to-GDP to 120% by 2020 - anything above 100% is unsustainable in the long-term.

What about the other indebted countries? For example, Ireland and Portugal have pushed through unpopular austerity measures, but have got nothing out of this deal.

The reason that UK, the US and Japan have not gone bust yet is because their central banks are able to print money to buy their own bonds. This may not be a healthy solution, but this has bought them extra time to sort out their economies.

European politicians are also hoping that China will get involved in providing funds. This must be the first time in the history that a group of developed countries are asking a developing country for financial assistance!

If the weak countries do not return to sufficient economic growth within the next few years, the problems of the Euro Zone are not going to be solved.


Funding inefficient economies based on poor effective judiciary and political systems is a nonsense. But all economies seem to be based on the same gymnastics: u grow and ur debt goes down, when u shrink don't worry, others will loan to u as once u have crashed u can only grow again, and we'll make the base lower for u for the next time anyway so that it looks acceptable to the general public, they do not understand much anyway. If an economy like the Chinese one had been an EU member they would have been long gone from the group. At the moment this framework serves them all.


Not a word about how the Greeks (and those countries following close behind) are going to fundamentally reform their unsustainable economies and bloated public sectors. How can the Europeans walk further into this undrainable swamp without solving the real problem? Choose between either: 1). full union of European economies matching the currency union or, 2). the exit from the currency union of those countries who won't play by the rules.


I can't believe how the results of yesterday's EU meeting(s) in Brussels are being reported on here in France in the media. Most seem to believe that the "crisis is over" and lots praise President Sarkozy as the saviour of the (financial) world. It seems that no-one dares to explain exactly HOW the banks are going to be recapitalised, i.e. using whose money. It's soooooo sickening!

mashed potatoes

Well, from my point of view all comments/fears are correct and there are still a lot of risks and much to do, but still ... are there better options/answers?

"There is a better answer: use the unlimited liquidity that only the ECB can provide by dint of its power to print money." --> So you mean letting taxpayers pay/guarantee even more? Because that's what it is, just in an indirect way, at the same time removing any incentives for clowns such as Berlusconi to clean up their own mess. Interesting idea

"Germany, in particular, has a deep aversion to anything that looks like printing money, ... forged in the experience of the Weimar Republic’s hyperinflation." --> Good one! I have hardly laught so much. I'm German, too young to remember that and I have a problem with hyperinflation for a lot of other reasons!

"Germany removed even a passing exhortation for the ECB to keep buying bonds from the summit communiqué." --> For good reasons, which are 1) Bundestag would have voted "no" otherwise, 2) it would increase the amount of guaranteed money, but indirectly via ECB or see my comment above

"In private, though, most hope the ECB will not withdraw from bond-buying." --> Exactly! They will do it anyway to prevent the worst! Since the ECB should be/is to a certain degree independent from governments, you don't need any exhortation..

Ed (Brazil)

I wonder what will make Germany say "That's enough!! We won't bail out nobody anymore". Seems it needs to be something very strong. But this day will come, just as the day when Greeks, Italians and Spanish will get back in black will never come....

It is another kick on the can down the road. It buys time. And time is getting more expensive.

Europe is insisting on having a slow learning curve on this crisis... The real deal (changing Europe's economic and fiscal structure) is not gonna generate the expected results. The next dececive moment will come on German elections... If a Bail out is neede just before the elections, it will rock markets.


In the long history of human endeavour, this must surely count as the most elaborate exercise in postponement ever devised.


As we know, the markets are always right. At the time of this posting, the major European share indices are all showing strong gains, ranging from (about) 3% to 5% or even more.

So is TE's assessment too gloomy?

Top Hat 001

So with this 50% haircut Greece's debt will be worth 120% of its GDP by 2020 according to the BBC. It makes you wonder how they got to such a point in the first place and if others will learn not to reach this level of debt themselves. Now all we can do is wait and see if Italy balances its budget and one trillion euro’s makes a large enough firewall.

Well let's all hope it works.



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