From the FT:
Eurozone authorities would help a member-state in serious economic difficulties before it needed to turn to the International Monetary Fund because of a risk of debt default, a senior EU policymaker said on Tuesday. “If crisis emerges in one eurozone country, there is a solution before visiting the IMF,” Joaquín Almunia, the EU’s monetary affairs commissioner, said. “It’s not clever to tell you in public the solution. But the solution exists.”
Mr Almunia’s comments made clear not only that EU policymakers would not remain impassive in the face of a crisis in a eurozone country, but would act pre-emptively before a bail-out became necessary. “By definition this kind of thing should not be explained in public. But we are equipped intellectually, politically, economically,” he said.
I’m not sure that it’s really so clever to keep this solution a secret. As the FT piece notes, there are serious legal restrictions in place that can hinder this kind of thing, such as restrictions on ECB lending to governments (The ECB website states “The Eurosystem is prohibited from granting loans to Community bodies or national public sector entities.”) and the so-called no-bailout clause in the Maastricht Treary prohibiting collective liability for debts (considered “an important pillar on which the European Union was founded” by reliably hard-line ECB Executive Board member Juergen Stark.)
Would it not be better for the Eurozone countries to have an explicit debate about this and, if necessary, outline a strategy and explain why it is legal? Wouldn’t financial markets be less jittery if they could be genuinely assured that a coherent Eurozone strategy was in place?