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Friday, 30 March 2012

800 billion euros!! Still not enough??

Can you imagine having 800 billion euros on your desk? How would it look like? Would your flat even be big enough to contain 800 billion euros? Honestly, I can’t even imagine that money!

This is the total amount of the ESM – or the “firewall, how it is called in popular EU executive speak  - that has been agreed on today. This is the amount of money to protect the Euro-zone and the EU from further financial shocks and deteriorating economics in its southern member states, and to bail out the countries in deep crisis – Greece, Portugal, and Spain.

This firewall is, for sure, the most expensive firewall in history.

800 billion euros, that’s about one trillion (!!) dollars. Europe is paying a high price to protect its economic and political integrity, while going through its biggest crisis since its ever creation as the European Economic Community (EEC) through the Rome-Treaties back in 1957, and the biggest ever crisis since the introduction of the Euro as the common currency in 17 EU member states.

Analyst predict that these 800 billion euros still are not the end of the line, assuming that the firewall will be increased up to 1 trillion euros – that would be around 11% of the EU’s total GDP.

Originally, the ESM (European Stability Mechanism) was supposed to replace the ESFS (European Financial Stability Facility) by mid-2012. Now, it seems that both instruments will overlap competencies and covered areas – a notorious symptom of EU-competencies-clash.

The thing is, however, that these 800 billion euros might not be enough to prevent further bail-outs; Spain is the potential next candidate. With general strikes going on in Spain and riots Greek style erupting, Spain is on a good way to follow the Greek misery.

While Germany insisted not to exceed the already acknowledged 700 billion euros for the firewall, the Irish Minister of Finance – Michael Noonan – states that a higher firewall would be a useful tool to prevent economic and fiscal attacks on the EU.

So, bigger equals better? Seriously not, a higher firewall would lead to a psychological message that the EU seems to ruin itself in order to avoid new bail-outs and to prevent an overall economic downturn.

The struggle isn’t over yet, although the European semester indicates all member states and euro-zone members to consolidate their national budgets and to implement more fiscal discipline. However, Spain failed to implement this discipline, once again. 800 billion are a lot, but it might not be enough. That’s how bad Europe is doing, economically, to claim that this massive sum still isn’t enough.

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