The spigot is opening wider. Now that the German government has acceded to expanding the EU’s bailout fund beyond €800 billion ($1 trillion), the French are demanding even further expansion.
With convoluted logic, French Finance Minister François Baroin is now demanding that the bailout fund must be increased to €1 trillion ($1.3 trillion), to shore up market confidence and “prevent contagion.” After all, he says,
The firewall, it’s a little like the nuclear option in military planning, it’s there for dissuasion, not to be used[.]
If it’s not to be used, though, where is its dissuasive power? In order to be convincing, it must actually be spent on bailouts. The problem is that, with bailouts there is no ability to convince the spendthrifts that there won’t be another bailout tomorrow. Even the Frankfurter Allgemeine Zeitung has the right of this one:
The pressure on the crisis-stricken euro-zone members to carry out reforms must not be undermined by the knowledge that, if they fail, they will be caught by a financial safety net.
Bailouts are disasters that keep on destroying.