A Rotten US Apple Spoils the EU Bunch
In case you thought the US was standing by innocently while the European Union invented its own trillion dollar bailout, think again. Unsurprisingly, the US was intimately involved in this newest mind-boggling expenditure, whispering sweet nothings like “overwhelming force” directly into European ears.
From The Washington Post:
“American officials became worried about the European response as early as February, a senior administration official in Washington said on Monday, when European leaders repeatedly stated that the Greece problem was well contained. They believed that mere expressions of support would be enough to calm the markets — and that they did not need to put in real commitments of emergency funds.
“The Americans were less persuaded, telling their counterparts that they had to eradicate ‘the risk of default.’ […] The United States officials began talking to their counterparts about an American concept: overwhelming force. ‘It’s all about psychology,’ said the senior official. ‘You have to convince people that the government will get its act together.’ But it was not until Sunday, one official noted, that the meltdown spreading across Europe was regarded as ‘an existential threat.’
“Aware that the ‘wolf pack’ markets, as the Swedish finance minister called them, had dismissed their every move so far as too little, too late, some of Europe’s leaders knew they had to act in a big way — to ‘shock and awe’ the markets […] Washington was also ready to help, in a limited but crucial way. The Federal Reserve offered to swap euros for dollars, easing pressure on European central banks, which were bleeding dollars.”
The article above seems to suggest that the EU’s biggest failure in this sovereign debt meltdown has only been that it’s consistently a day late and dollar short. The bigger problem is really that it’s been trying to bailout Greece in the first place. Conjuring up emergency funds in a newly-created, off balance sheet “special purpose vehicle” is just the kind of financial wizardry that keeps creating one crisis after another.
It’s unfortunate the US has been so intimately involved in the current build up to another disaster… especially given the wide array of financial time bombs that are already being cooked up by policymakers right at home. To offer the benefit of doubt, perhaps the White House was only feeling that (extreme debtor nation) misery loves company.
You can read more details about President Obama’s intimate conversations with EU leaders in The Washington Post’s coverage of how Europe’s debt aid package took a nudge from Washington.