A socialist may become French president for the first time in 17 years. The Dutch government has collapsed as it struggles to pass an austerity budget. And Spanish bond yields are hovering near 6 percent as the country struggles to meet its budget targets. Investors had plenty of reasons to abandon European stocks today, and they did so in a big way.
But while the clouds of gloom gathered over Europe, the International Monetary Fund was busy topping off its war chest to $430 billion to fight future crises. The problem is, the "bazooka" that the markets have been looking for these past few years is combat-ready, but isn't being used because industrialized countries don't want to disrupt the status quo.
Brazil, Russia, China and other emerging economies are willing and able to help solve the European debt crisis through guaranteed lines of credit. Yet they are being denied their rightful place in the new global order in return for that aid. The U.S. and Canada renewed their calls on the weekend for Europe to do more, but their pleas failed to disguise their reluctance to increase IMF voting rights for the fastest-growing economies. The U.S. would also be unable to win support in Congress to boost contributions to international organizations.
As Markus Ziener, a columnist for Germany's Handelsblatt business daily, wrote today: The alarmist approach the U.S. has taken to the euro crisis is designed "to distract attention from its own problems and to identify a guilty party when the country's own forecasts aren't achieved." Add that to the list of America's red herrings.
The euro crisis is too big for its members to handle alone. The entire federal budget of the zone's biggest country -- Germany -- is a bit more than 300 billion euros ($394 billion), a drop in the ocean when you consider that roughly 3 trillion euros would be needed to effectively backstop the region's indebted nations, as Bloomberg View has pointed out. If the European Central Bank is to be spared the burden of further bond purchases, the rest of the money has to come from somewhere, and there are white knights with deep pockets who want the IMF recognition that is well overdue.
When Helmut Kohl joined hands with Francois Mitterrand in 1984 to commemorate the Battle of Verdun, the euro was still just a twinkle in the eye of the leaders who conceived it. If Francois Hollande wins the May 6 election, a French socialist will once again team up with a German Christian Democrat. This time they will need to join hands with the world's tiger economies to save the currency.
(David Henry is an editor for Bloomberg View.)
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