Bailout fever

Portugal denies it needs a bailout to help it out of debt, yet, as The Wall Street Journal writes, Europe’s big countries will decide whether or not it needs help — in order to save the currency as a whole. But is “bailout fever” really working? The media are sceptical.

Cracking the whip

Whatever else the €177 billion bailouts of Greece and then Ireland may have accomplished, they haven’t stopped contagion within the euro zone, writes The Wall Street Journal.

... By removing the weakest members of the euro-zone from the public markets one at a time, they expose the next-weakest to increased pressure. No one wants to be the tail in a game of crack-the-whip, and investors don’t necessarily want to be exposed to the next country to fall into danger of default. ...

A serious crisis

It is one thing for an anti-European British politician, or a short-selling New York banker, to express scepticism about the euro’s future. But when doubts come from a founding father of European monetary union, everyone should pay attention, writes the Financial Times , referring to a recent essay by Otmar Issing, the European Central Bank’s first chief economist.

... Otmar Issing warns that Europe’s reaction to the sovereign debt crisis, coupled with the unsound fiscal policies of individual countries, will, if unchanged, threaten the survival of monetary union. ... The financial rescues of Greece and Ireland risk setting in motion an unstoppable momentum towards a “transfer union”. This, he says, will give highly indebted countries “the potential to blackmail more solid member states” — of which Germany is, of course, the most prominent example. The resulting political and economic tensions may prove fatal for the euro. ...