... a third Greek bailout looks like only a matter of time. Get ready for more bitter rows over how the pain should be distributed between holders of Greek bonds and the taxpayers of other eurozone countries. That is no way to encourage companies to invest or consumers to spend – but it is the way to try the patience of German taxpayers.
The second problem is the design of the European financial stability facility – the rescue fund that is to be the first line of defence against speculative attacks. But how would Italy and Spain be defended in practice? The EFSF has been handed powers to intervene but no new cash. A fighting fund would have to be raised by passing the hat round member states – a challenge that looks a tall order today.
Eurozone leaders, one assumes, believed they were buying themselves some space to address this defect. To judge by yesterday's bond prices, they have less time than they thought.
26 July 2011
Quote of the day
Told you so. The Guardian reports: