The Great Debate UK
from Bethany McLean:
The euro zone’s self-inflicted killer
By Bethany McLean
The opinions expressed are her own.
There were a lot of things that were supposed to save Europe from potential financial Armageddon. Chief among them is the EFSF, or European Financial Stability Facility.
In the spring of 2010, European finance ministers announced the facility’s formation with great fanfare. In its inaugural report, Standard & Poor's described the EFSF as the “cornerstone of the EU’s strategy to restore financial stability to the euro zone sovereign debt market.” The facility itself said in an October 2011 date presentation that its mission is to “safeguard financial stability in Europe.”
That of course hasn’t happened. And the evidence suggests that the EFSF may have only exacerbated the problems.
In theory, the facility is supposed to provide a way for a country that the market perceives as weak to still borrow money on good terms. The initial idea was that instead of the financially troubled country itself trying to sell its debt to live another day, the EFSF would be the one to raise the money and lend it to the country in question. The logic was simple: country X might be shaky, but the EFSF deserved a triple-A rating.
Who is helping who in the China-Europe relationship?
-Kathleen Brooks is research director at forex.com. The opinions expressed are her own.-
The saying goes that you only really know who your friends are during times of crisis. Well European officials must have been beaming after two of the world’s largest economies promised to purchase the debt of the currency bloc’s most troubled nations. China came out first and pledged to “support Spain’s financial sector”, through participating in its upcoming debt auctions. Likewise, Japan pledged to purchase a quarter of the upcoming euro zone bond sale that will help fund the bailout of Ireland.
