De­fer­ring the cri­sis

Finweek English Edition - - Thefinweek -

EU­RO­ZONE POL­I­CY­MAK­ERS sur­prised prob­a­bly even the most op­ti­mistic ob­servers by pre­sent­ing a quick, force­ful and un­prece­dented cri­sis pack­age of al­most 750bn. It had the de­sired ef­fect and im­me­di­ately reignited bourses world­wide. But there’s still an ele­phant in the room. That’s the ques­tion about whether the bailout is a last­ing so­lu­tion or one that’s just de­ferred the Euro­pean debt cri­sis for a while?

In the same vein as the $700bn pack­age the United States ad­min­is­tra­tion used to prop up its ail­ing fi­nan­cial in­sti­tu­tions in 2008, the Euro­pean Union hopes the size of its pro­gramme will sig­nal a “shock and awe” com­mit­ment to trou­bled coun­tries such as Greece, Por­tu­gal and Spain. Ac­cord­ing to the agree­ment struck be­tween the EU’s fi­nance min­is­ters, the res­cue pack­age in­cludes 440bn in new loans, as well as 60bn un­der an ex­ist­ing lend­ing pro­gramme for coun­tries fac­ing in­sta­bil­ity. The In­ter­na­tional Mon­e­tary Fund will of­fer a fur­ther 250bn.

While EU com­mis­sioner for eco­nomic and mon­e­tary af­fairs Olli Rehn is gung-ho about how the plan “proves we shall de­fend the euro what­ever it takes” it not only re­mains un­clear as to how far the colos­sal loan pack­age will go to al­lay pub­lic un­rest or for how long.

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