Europe Rewrites its Rule Book in Creating Fund to Contain Financial Crisis
May 12th, 2010Via: Washington Post:
The massive emergency fund assembled to defend the value of the euro is backed by a political gamble with an uncertain outcome: that European governments will rewrite a post-World War II social contract that has been generous to workers and retirees but has become increasingly unaffordable for an aging population.
The trillion-dollar program, to be underwritten largely by the 16 nations that use the euro and by the International Monetary Fund, represents a virtual discarding of Europe’s rule book.
Under the rescue unveiled early Monday, governments that broke the currency union’s spending restrictions are being offered a commitment of solidarity, with weak links such as Greece and Portugal supported by the creditworthiness of Germany’s strong economy.
The European Central Bank will act as a bond broker of last resort for troubled European governments, a role so distant from its conservative, inflation-fighting personality that Jean-Claude Trichet, the bank’s president, emphasized that the ECB remained “fiercely and totally independent” of political concerns.
