Deferring the crisis
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.