By Paul Vigna
The Europeans wish this latest Greek drama was their only problem.
Because while the sucker-punch Greek PM George Papendreou threw this week — the now-infamous referendum — the fact remains that much of that three-pronged bailout package announced last week to such fanfare remains little more than a series of proposals (as, of course, underlined by Mr. Papendreou,) and filling in the details is proving harder than the Eurocrats had hoped (as, of course, underlined by, you guessed it, Mr. Papendreou.)
For one thing, lost in the hysteria over the referendum was the fact that European officials got basically a “talk to the hand” from China officials when they went hat-in-hand looking for investors in the bailout fund. That’ll complicate matters.
“Even if the Greek referendum problem is ironed out, hopes within the euro-zone that governments from outside the region will contribute to an increase in the ‘firepower’ of the European Financial Stability Facility (EFSF) already look dead in the water,” Capital Economics writes. “The notion that developing economies should bail out rich European countries always looked fanciful: after all, Italy’s per capita income is eight and 25 times that of China and India, respectively.
“What’s more, sovereign wealth funds make investment decisions overwhelmingly on financial rather than political grounds.”
So, prong one, Greek debt deal: under pressure, doubt and turmoil. Prong two, EFSF expansion: under pressure, doubt and turmoil. Just wait until we find out Europe’s banks will need more than 100 billion euro to fill their capital holes. But, well, nah, couldn’t happen.