A euro stabilization package of nearly $1 trillion may be enough to protect Greece, Portugal and Spain from volatile credit markets, said Federal Reserve chairman Ben Bernanke to the Woodrow Wilson Center, but investors were not yet convinced Europe’s debt problems would be resolved, and even more money may be needed.
The comments follow a pattern of offering an optimistic view of the short term, even though doubts about the long term are well-founded.
According to Reuters, Bernanke offered this:
“European leadership is strongly committed to doing whatever is necessary to preserve the euro, preserve the euro zone, preserve the European project, and avoid financial problems that would certainly arise.”
European leadership may be committed, but is its citizenry? Just yesterday, Reuters reported that European Central Bank board member Christian Noyer noted that political leaders were optimistic about recovery but remained “wary of sparking public unrest after a string of riots and strikes since last year.”
The praise Noyes offered was that the Greek crisis has demonstrated the capacity of European governments to reach “cooperative solutions” — that is, finding a way to placate rioting labor unions while promising creditors to somehow pay off debt. It’s becoming clearer, instead, that these “cooperative solutions” are effectively new ways of dressing up the fact that citizens like those in Greece feel entitled to a lifestyle that their economy cannot afford. They opt to pay for it using the government credit card, one they refuse to pay for themselves through their taxes.