Eurozone Borrowing to Bail Out Bad Debts

Why does this sound like a bad idea?

Under pressure from the US and the rest of the international community, eurozone officials are considering a “big bang” plan to dramatically increase the size of the European bailout fund to tame financial markets and bring the sovereign debt crisis under control.

A European Central Bank (ECB) board member threw his weight behind a plan, first mooted by the US Treasury, to increase the size of the European Financial Stability Facility (EFSF) by allowing it to borrow additional funds from the ECB. [Emphasis added]

The comments, by Lorenzo Bini Smaghi at a conference on the sidelines of the International Monetary Fund, were the first hints that a plan to leverage up the EFSF is being considered by the ECB and the eurozone governments which are contributors to the fund.

Only in the perverse logic of government and bleeding edge investing does this kind of thing make sense.

One Response to “Eurozone Borrowing to Bail Out Bad Debts”

  1. NavyOne Says:

    A bad idea whose time should not have come. . .


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