Europe’s Banks, Europe’s crisis
BRUSSELS – Europe continues to constitute the epicenter of Act II of the global financial crisis, which has now mutated into a sovereign-debt crisis within the eurozone. How could this happen when, at least on paper, all problems had seemingly been resolved during May’s extraordinary EU summit meeting, which created a European Financial Stability Facility (EFSF) and ensured total funding of close to $1 trillion?
Those May promises have, in the meantime, been made more concrete. A “special purpose vehicle” (SPV) has been established in Luxembourg, and can already count on hundreds of billions of euros in guarantees from member states.
If all the resources promised (€750 billion, including financing from the International Monetary Fund) were to be used fully, the EU could fully refinance all distressed countries (Portugal, Spain, and Ireland) for a couple of years. Moreover, the European Central Bank has shown willingness to buy government (and private) bonds if it judges that the functioning of the market has been impaired.
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