On Thursday Angela Merkel’s proposal to increase both the size and the number of applications available to, the European rescue fund, was accepted in the Bundestag. The EFSE is now thought to stand at around $600m and this week’s developments may prove vital in Angela Merkel’s attempts to quash widespread public scepticism over Germany’s role in the rescue mission.
The Euro rose to a week-high against the dollar following the news, before slipping back to near pre-release levels. The original euphoria no doubt spread from the simple phenomena of Angel Merkel actually doing something, following an explosively passive six months for the leader of the Christian Democratic Union.
Negative sentiment was rife among markets however, with WSJ calling the expanded fund “more bad money covering up more bad loans”.
It would appear that the European Financial Stability Fund does begin to address the worrying symptoms presented by Europe’s periphery, while doing little to address the root cause of the current financial woes of Greece and co. Perhaps more radical reform incorporating joint issued European government debt, a one-size-fits-all income tax structure imposed across the region, or a synchronised European public pension fund, coupled with a more nurturing monetary stance, is the way forward for Europe if the situation continues on its current path.
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