Whatever it takes?

Your title is a pet peeve for me. "Whatever it takes" may be the key phrase of David Wessel's book on the U.S. financial crisis, but it is not a quote that he attributes to anyone. U.S. statements on contingency plans were often ambiguous too; this E.U. statement -- and I thank you for unpacking it -- seems of the same ilk, not dramatically different in clarity or obfuscation.

Actually, not a bad compromise - especially if Spain never needs a bailout. Which should be the case. Now let's concentrate on helping Portugal WITHOUT a bailout...

If there is a deal there does not seem to be much clarity about it. I guess we will see arguments develop as time goes on as usual. In the end the real news out this week was in an area where notayesmanseconomics has been challenging the Euro zone.

"the balance sheet of Europe’s central bank looks ever riskier to me and it is quite conceivable that we could be in an era where central banks as well as private-sector banks need bailing out."

It seems as if his advice is being heeded as there was an announcement of extra capital being made available to the European Central Bank.This was probably the news of the week.
http://notayesmanseconomics.wordpress.com

Sirs,

"Whatever Can be Taken" might be a more accurate headline.

The "US of Europe" was a trope used for years prior to euro conversion. But it is a flawed concept. The EU is not made up of states; it is made up of countries, most enormously different in culture, institutional strength, behavior and history. What real structural reason is there for monetary unification (let alone fiscal), other than a banking consolidation play, and further concentration of the special interest ECB?

Moreover, among Europe's best performers are two countries that abstained from EU membership: Switzerland and Norway. The rest, outside of Germany, are and always have been, problematic if not serially dysfunctional entities.

And why such concern about Europe? What about the Middle East (imagine, if you can, a central consolidated currency and government)? Or South America? Or how about North America (Mexico, the US and Canada)? China, Taiwan, Japan and Korea? Russia and the Caucasus? What about India?

Europe hosts a very old bank merchant regime that seeks to further consolidate its power. It has established an imbedded social role with cultural heterogeneity that took centuries to establish; it is considered nearly culturally authentic (or cloaked), except in certain member states.

This is not the case in culturally homogeneous Asia and the ME where they would stick out like a sore thumb, and one reason a "US of Europe" cannot be pursued there through the European banking cartel.

Regards.

@Matt Andersson:
And whoever said the US is "culturally homogenous"?

Norway has a lot of oil and Switzerland had/has a lot of banking secrecy.

The proof of the EU is just how well those "problematic" countries have performed over the years, both politically and economically. If things are not perfect - well, we did not expect a miracle in a decade or two, did we?

Why doesn't the ECB simply create the Euro's needed to fund current deficits and divvy it out on a per capita basis, as per the Mosler plan

http://moslereconomics.com/2009/02/17/re-proposals-for-the-eurozone-2/#2...

Am I the only person who finds it amazing that while everyone is asking what happens if the EuroZone doesn't bail out the bankers and bondholders, no one asks what happens if the various "bailed out" states cannot repay the ECB? Everyone can plainly see they'll never be able to. You have an entire currency (the Euro) based on a lie everyone knows is a lie. Remarkable!

"For now, it seems, Angela Merkel is determined to do whatever is required to avoid further financial commitments to the euro."

Indeed? I, as German taxpayer, do very much hope that she finally starts to live her oath. Which is sworn to the German people, not to some profligate foreign nations.

There must be an end. No Eurobonds, no further bailoutomania for banks and countries almost solely paid by the German working class.

With the hedgefund barbarians at the gate, the compromise is likely to crumble at any sign of weaknesses. The best solution is to still to have a more flexible two-track currency mechanism - Neros and Peros for community.

@outsidethebox:

Your comment is based on prejudice and/or reading only those articles critical of the euro (usually coming from the Anglo-American press - I wonder why?)
The euro is not "based on a lie". It has been remarkably stable over the last 12 years, while both the pound and dollar have seen wild gyrations in their international exchange rates.
The various "bailed out" states are two: Greece and Ireland. Together these countries represent something around 7% of Eurolandia GDP at most. Did the US dollar face collapse when New York City and other big cities went into bankruptcy in the 70's? Will California by itself destroy the dollar? I think not.
The "bailouts", which are not gifts but loans, give time to Greece and Ireland to effect necessary reforms - don't forget that some 30-40% of the Greek economy is under-the-table, so their debt-to-GDP statistics are not as bad as it might seem. But the bailouts also give time to European banks to reduce or mark down their exposure and to other countries to put their own economic house in order, so as to avoid contagion.
Would you like to bet against the Euro? You would be making a very big mistake.
"Physician Heal Thyself!"

Joe Solaris I agree with you, I think efforts should be put in helping Portugal gaining back some credibility from the markets. It isn't really in that bad a shape to be honest.

Bailouts are not the way out and I agree with EU politicians should only happen as a last resort. It doesn't really help. In fact it makes it harder as it seems that it is the bailouts not the crises that are contagious.

Americans and English alike, for different reasons, pray that the Euro collapses.

The Euro is the only currency that can threaten the once mighty US dollar. The financial woes of the USA, which are enormously greater than those of any european country, even Greece's, are slowly melting the value of the US$. In spite of those woes, the US$ is still the major reserve and trade currency of the world.

Being the world´s reserve and trade currency bring to the USA the fabulous bonanza of being able to pay for imported products with nothing but painted green paper (the last year Americans exported more than imported was 1969).

This is nothing more than wishful thinking which is amplified by biased media world over.

It is not only wishful thinking, but it is also a way of diverting the media from the economical disasters of the USA and UK, by giving the media something else to talk about. It is merely a way of carrying the light away from themselves and their problems.

Eurolandia is fine, thank you. Individuals may face financial stress, but the body as whole is safe and sound. Of course, the Germans will try to cash in a greater value from their not so generous rescue of the smaller "profligate" states. But at what price? Are they giving their euros away? Are they lending it at zero interest? My eye. They are making a fantastic deal at Greece's and Ireland's expense and show off their "generosity".

I can very well see that Americans pray that this would happen since the Euro is today the only currency which could threaten the US dollar as a reserve currency with all its privileges.

This desire is even greater as we see the US dollar slowly, but steadily, melting away for quite sometime now.

@outsidethebox:

[...] no one asks what happens if the various "bailed out" states cannot repay the ECB? Everyone can plainly see they'll never be able to. You have an entire currency (the Euro) based on a lie everyone knows is a lie. Remarkable!

Possibly, but are you sure to understand what the current arrangement is?
The Republic of Greece is borrowing from fellow EU states at a 6.5% rate.
States that borrow at, say, 2.5%, will make a profit out of the differential, so the risk-taking is properly remunerated.
You too can make a buck borrowing at US base rates and then buying Greek bonds.
So, where's the lie?

@Serious Sam

"bailoutomania for banks and countries almost solely paid by the German working class."

Well, what about President Bush's TARP bailout? Ain't that the mother of all bank bailouts?

However, there are differences: the republic of Greece is borrowing money, not receiving it as a present.

Moreover, given the imbalances in borrowing cost, Germans are -rightly- turning out a nice profit by lending to Greece!

Incredable how all Europeans sell this contingency facility as THE solution to your problems. This is just another palliative mechanism, that is good alright, but is no solution. This just buys time.

The "In denial" Europeans are still thinking they can have all those deficits, and finance them forever. It is trivial to conclude you can't. It is trivial to conclude that you have only come up with "smart ass" solutions to your problems.

The title to this article should be: "We will avoid pain, whatever it takes !!!". And by pain I mean reduce your expenditures. Oh, haven't you thaught about that yet ? Or you are not willing to do that, are you ?

I'm afraid not... This spoiled European generation... Your grandparents faught WWII, their children help rebuilt the continent, and current generation did.....

Did what ? NOTHING !!! Exepct for fighting for a fat pension low retirement age, hard to fire work.

The question is until when you will be able to convince the wolrd to look the other way, so creditors won't force you to spend a litle less...

JFCarli

You are right: US and UK posters want the Euro to fail. It is called sour grapes.
The rating agencies should stop ignoring US and UK humungous debt.
But the Euro is going to be doing just fine.
After the drop of the second dip, the two anglos will be history. After thirty years of depression they will finally be able to put under control the Corporations as FDRoosevelt did. Obama cannot do it obviously. Luckily for him the 20% unemployed now will be 30/40% by 2012 and there will be blood on the streets. The US will withdraw from foreign adventures and declare "victory" as they always do.
Then "socialism" will not be a dirty word. WE have had it in Europe since 1870 and it is alive and well.

China says it is offering concrete helps to Europe. Next step is let the PIGS peg their new currency notes to the undervalued Yuan until they regain competitiveness.

@pedrolx:
Yes, I really don't think Portugal is in such bad shape. Much similar to Italy where we too were a bit depressed before this crisis since every other economy in Europe seemed to be booming. Then the crack showed us our doldrums were also about avoiding others' excesses: no financial bubble, no real estate bubble and no bank failures here.
BTW, I saw your exchange on the FT. Seems they were a bit heavy-handed.

@Ed(Brazil): Are you really Brasilian? In any case you are ranting about European denial - it has apparently escaped your attention that every country in Eurolandia has been slashing their deficits over the last 12 months, some by quite a bit. Next you will start talking about how weak PIIGS exports are... despite the fact that Brazil is importing huge amounts of merchandise from Italy and Iberia...

@jfcarli, ale66, virtu:
Yes, I agree with you. But I still think Berlusconi's Italy holds the keys to ending this crisis or triggering a larger one: If someone in Rome was instituting Greek-style structural reform (i.e. cutting over-generous pensions, etc.) and privatising the still significant pieces of our economy in public hands (ENEL, ENI/AGIP, RAI, Finmeccanica, etc.) we could retire the 280 billion euros of debt that needs to be floated this year. That would go a long way toward strengthening Italy's international credibility and taking the pressure off other European countries rolling over large amounts of debt in 2011 - particularly Portugal and Spain.
Berlusconi's nationalist, anti-euro stance, basically in line with the current mood in the UK (but not traditional Italian policy) amounts to a war against the weaker "PIGS" countries: proving Italian finances are "stronger" and crowding out "weaker" debtor treasuries. This is a dangerous and disloyal game to be playing...
and to coin a phrase, it is "NOT IN MY NAME".

Pedro, joe solaris, virtu, jfcarli and other friends of Europe

Let them rant. The problems in the Euro zone are minor compared to US and UK.

If you put a Greek upside down in his fully paid up family home and shake hard, a lot of hidden gold coins will come tumbling out. The Greek state is poor, sure. Individual Greeks are not doing so bad out of having kept their state poor.

If you do the same to the average Brit in his bank owned home, put him upside down and shake, the moon and sixpence will fall out. He hasn’t got two farthings to rub together and may have to sell his Merc or BMW bought from the second mortgage.

Ireland is the only candidate with a real problem which is based on its British, German, French etc. induced casino economy (doing all the dirty stuff that they could not do back home and creating major problems for Ireland and themselves) but Ireland has powerful friends and is being helped. Mercifully it owes most of the money to the British across the water who will think twice before destroying themselves by destroying Ireland. So even Britain, kicking and screaming, is helping

Portugal does not have much of a problem, if you look hard and without prejudice.

So let them rant to their hearts delight. It is therapeutic. It does them good.

why doesn't the Economist never invites EUROPEAN economists to talk about the EUROPEAN crisis? It would be a fantastic article if you could invite 16 different economists from the eurozone and let them have their say! Instead we (and the world) are forced to endless variations of the "British" version of the crisis! Most "eurozone" dwellers are stuck with the comments threads!

There are brilliant economists in all the 16 eurozone countries! Invite them to have their say! It would be only fair, although I don't think fairness is something of importance these days.

I strongy recoomend the economist to hlod special weekly articles written by invited european economistd from each of the constituents of the eurozone to state his or her view.