Sunday, July 01, 2012

Europe Agrees to Bailout as Leaders of 17-Nation Euro Zone (Eurozone) Agree to Roll Over Existing Debt and Recapitalize Troubled Banks Directly Out of the ESM

Europeans Agree to Use Bailout Fund to Aid Banks is the headline by Steven Erlanger and Paul Geitner at the New York Times Global Business with Reuters.

The solution agreed to by the 17-member Euro zone (Eurozone) is something that has been apparent as an alternative for a long time, which is that existing debt must be rolled over and troubled banks recapitalized directly from the Eurozone bailout fund, the European Stability Mechanism (ESM).

For skeptics, just presume that the people doing this bailout understand banking and also appreciate what "money" at the level of billions and trillions represents.

Debt is never just "one-sided".

You have people and institutions who owe money, and you have people and institutions to whom money is owed.

So why is THAT a crisis? That is the normality in banking.

When trouble surfaces, that can always be settled at the level of nations, much in the same way that personal bankruptcies can be settled.

There is an old saying that goes something along the lines that "fun" does not create alliances, but that sharing "trouble" does, so that all-in-all, the Eurozone's problems are probably good for creating a stronger Europe.

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