Europe’s bailout spiral

Well, the German Bundestag approved the next phase of the European bailout late last week, so now the future of Europe is assured—of more bailouts, of course. And this one is gonna be a doozy. As it stands now, the ante has been upped to about €440 billion euros, roughly the price of a fondue party for 12 in Lucerne. But policymakers were already tipping their hands this week by discussing the possibility of “leveraging” this amount to provide up to €2 trillion euros of assistance to the heavily indebted “CYRYFS” countries (I don’t like the “PIIGS” acronym so I made up my own just now. It stands for “Can’t You Restrain Your * Spending?”) My money—still held in glory-orange, Alex Hammy $10 bills, thank you—is on an escalation of the bailout to at least a few trillion euros.

And it won’t help—it’ll just make the inevitable defaults bigger, so that more countries and banks will get pulled down by it. The Europeans are running scared—they’re so frightened by the consequences of stopping now that they’re not thinking about what comes after the next round of bailouts. The answer, for now, is more and bigger bailouts. But that can’t last. The debt markets are larger than the economy, so eventually the problem will get so large that even the whole European Union won’t be able to afford more bailouts. Ireland, for example, is in trouble precisely for this reason. It learned the hard way, trying to bail out its banks, that the banks’ bad loan problems were larger than Irish GDP.

Somebody should have stopped the madness, and I blame Angela Merkel, the German chancellor. Earlier in the crisis, she was talking tough about pushing countries out of the eurozone who can’t live up to the fiscal policy demands of a currency union. And she was promising not to turn the European Union into a “transfer union.” Since Germany is in the driver’s seat in the eurozone, thanks to its dominant economy and hard-learned tradition of fiscal and monetary restraint, Merkel was in the position to take a firm stance and at least force a serious consideration of non-bailout options. Clearly, it would have been extremely difficult to balance a commitment to preserving the European Union with the need to take unpleasant actions that could end up with some countries leaving the eurozone.

But Angie—I thought you were made of that tough stuff! I thought you were the perfect combination of Margaret Thatcher and Angela Lansbury during the “Murder She Wrote” years. I’m really disappointed.

And I’m not the only one. I think the euro is disappointed, too. In fact, for days now, I keep thinking about the euro actually singing the Rolling Stones’ “Angie” to Angela Merkel. Of course, in my mind the little €1 euro coin has stick-figure arms and legs, with those cartoon glove hands and cute little shoes. I envision the obverse of the coin as the “face” of the euro, which features the outline of Europe and the big “€1 euro”on it, but if you prefer you can flip the coin over and have the reverse also be the face of the euro. For example, the Austrian euro coin has Mozart on it (rock me, Amadeus!) and the Italian one has the Vitruvian Man on it, which might give you that extra little bit of ironic enjoyment.

At any rate, even though “Angie” is a great all-purpose “we should break up now” song, it seems to me that it was actually penned for exactly this situation. I don’t know what Mick and Keith were up to, back in late 1972, but it’s entirely possible that they foresaw the introduction of the euro, the ensuing sovereign debt crisis and the decision power resting in Angela Merkel’s hands at this point. The crushing sadness stemming from knowing that the blossoming euro would be cut down prematurely by reckless government spending, combined with political dithering and pandering, certainly would inspire some great music, at least in my mind. And the depression caused by having this terrible foreknowledge would also help explain the abysmal drop off in the quality of the Stones’ recordings after “Some Girls.”

So just imagine with me, for a moment, our sad euro serenading Ms. Merkel, giving her the bad news. “No loving in our souls and no money in our coats,” check. “Can’t say we’re satisfied,” that’s for sure. “Dreams going up in smoke,” uh-huh. “Can’t say we never tried,” well, okay, benefit of the doubt on that one, but if you had really enforced the Maastricht criteria, we wouldn’t be in this mess.

And then the kicker: “Angie, ain’t it time we said goodbye?” I think it’ll come to that, if Europe keeps rushing headlong down the bailout path.