Wall Street Journal
March 31, 2011
The euro zone's governments, the European Central Bank and the International Monetary Fund have mobilized more than €800 billion ($1.13 trillion) to "stabilize" the region. We have a European Financial Stabilization Mechanism, a European Financial Stability Facility and the prospect of a European Stability Mechanism, to say nothing of €76.5 billion of ECB money spent "stabilizing" government bond markets.
These have now had 10 months to work their stabilizing magic, so why is the situation not stable?
Ratings agencies' individual decisions can be behind the curve or just plain wrong, but when major U.S.-based houses can't muster a single "stable" outlook for the sovereign debt of Greece, Ireland, Portugal or Spain, that seems reasonably clear.
It isn't just the agencies. The broader market is losing, or has already lost, faith in the ability of the euro group and ECB to stop a restructuring of government debt. Greek two-year bond yields have risen to 15% from 8.75% since Greece got its "stabilization" package. Irish ones have risen to 10.00% from 2.44% in the same 10 months. Note that these are bonds that are due to mature while these countries are still under the EU/IMF umbrella.
All the euro-optimist can do in response is bluster that the herd is always wrong.
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