The Corner

Euro Shock and Awe, Part II, in 3D

Europe has mustered a bailout that puts TARP to shame, $962 billion worth of loans and bond purchases to stop the bleeding in Greece and prevent it from spreading to Spain and Portugal:

Jolted into action by last week’s slide in the currency and soaring bond yields in Portugal and Spain, the 16 euro nations agreed to offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators. The European Central Bank will counter “severe tensions” in “certain” markets by purchasing government and private debt.

“The message has gotten through: the euro zone will defend its money,” French Finance Minister Christine Lagarde told reporters in Brussels early today after the 14-hour meeting.

Under pressure from the U.S. and Asia to stabilize markets, the European governments gambled that the show of financial force would prevent a sovereign-debt crisis and muffle speculation that the 11-year-old euro might break apart.

The two-pronged offensive pushed up the euro 1.4 percent to $1.2931 as of 11:12 a.m. in Tokyo. The Nikkei 225 Stock Average climbed 1.3 percent to 10,499.25.

“This is Shock and Awe, Part II and in 3-D,” Marco Annunziata, chief economist at UniCredit Group in London, said in an e-mailed note. “This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion.”

We shall see. Full story here.


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