Euro crisis and response: shock and awe

A lot of the talk this past week has been on how to deal with the Euro crisis, and it will be a key topic at the G20 meetings.

The favored approach is to call out Greece as an example of bloat, cut state budgets, let markets work their magic, and do anything to keep the stock market on track. The 1 trillion dollars to offset the crisis is seen as swift action, but this is public money once again spent to ensure that private creditors are paid. It is always in the form of “we have to, or it will all collapse”, but shouldn’t we start looking at the root causes and long term-effects? What a roller coaster. And the ride has barely begun.

Here are a few articles for context:

• Can the Euro be Saved? Germany (and its Constitutional Court), partly following popular opinion, has opposed giving Greece the help that it needs.

To many, both in and outside of Greece, this stance was peculiar: billions had been spent saving big banks, but evidently saving a country of eleven million people was taboo! It was not even clear that the help Greece needed should be labeled a bailout: while the funds given to financial institutions like AIG were unlikely to be recouped, a loan to Greece at a reasonable interest rate would likely be repaid.

• Financial Reform “Fighting to reduce government budget deficits during the worst recession in over 80 years is not only bad, it is insane — unless you are an opposition political party trying to prolong the recession for partisan political gain.”

“Failing to provide fiscal stimulus today will prolong the recession, continue to depress tax revenues indefinitely, and increase the national debt over the long-run.”

• Markets close sharply higher on EU bailout plan

• “Shock and awe” euro rescue lifts global markets

• High debt on G20 agenda: Harper PM confident Europe will resolve Eurozone debt crisis