Wall Street Journal
September 27, 2011
And that was that. An idea that tantalized global financial markets came out of the weekend and immediately sank into the tar pit of European decision making.
The sensation at the IMF meetings in Washington was a vaguely formed idea to increase the lending capacity of Europe’s EFSF bailout fund not from €250 billion to €440 billion as agreed in a July 21 summit, but to as high as €2 trillion by leveraging its assets.
Only this, proponents argue, would persuade markets that the EU wouldn’t allow Europe’s government debt crisis to spread to Italy and Spain, potentially scuttling the euro as currency.
Financial markets rallied around the globe Monday as investors saw the first glimpse of real hope for containing the European debt crisis. Problem was that the lead advocates of the deal, the IMF’s Christine Lagarde and the European Commission’s Olli Rehn, are bureaucrats who don’t have to answer to electorates every few years.
Decidedly not on board were the actual governments of the 17 euro-zone nations. Euro-zone finance ministers came home from Washington doubting they could sell more risk to voters already grumbling at past and present tax money being put behind insolvent state treasuries in Greece, Portugal and Ireland.
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