Wall Street Journal
December 3, 2010
The trillion-dollar bailout that European governments assembled last spring in a shock-and-awe effort to halt the sovereign debt crisis has failed. The crisis has enveloped Ireland and threatens Portugal, while Spain and Italy wait in trepidation.
Why didn't dangling such an enormous sum of money in front of bond investors work to calm their nerves? Rather than banishing the anxieties of investors, some experts argue that bailouts have served only to heighten investor worries.
The bailout structure "destabilizes the market," says Paul de Grauwe, professor of economics at the University of Leuven in Belgium.
Much of the problem lies with the conditions placed on the rescue funds to make them palatable to German taxpayers, experts say.
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