Last weekend, European Commission President Jose Manuel Barroso said: "We will defend the euro whatever it takes."
This was after French President Nicolas Sarkozy and German Chancellor Angela Merkel announced that Europe will set up an intervention mechanism to calm markets rattled by the Greek debt crisis, and stave off any attack against weakened nations whose financial systems are at risk. Sarkozy and Merkel also said laid out a plan to defend the euro against "speculators", which led to Barroso's statement.
This is just a stopgap, and it does nothing to eliminate the underlying problems -- low productivity of southern European nations, high debt loads all over Europe, unrealistic social commitments, higher growth in the rest of the world. If it takes $1T at this initial stage of the crisis, what will it take later? What will they do when the next southern European country reaches crisis stage? If the ECB has to buy government bonds, they are just monetizing debt (while holding toxic assets). The underlying problems will remain, which raises the risk that eventually debts will be defaulted or inflated away, and that the EU will face some kind of political rearrangement in the future.
"Whatever it takes"? The real problems are just being postponed.
