To stave off Greek debt crisis, euro zone unveils its own TARP
The US put $700 billion into a bailout of US banks during the financial crisis. Now the nations of the euro zone are proposing a similar bailout fund – €750 billion – to deal with the Greek debt crisis.
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The German coalition government led by Chancellor Angela Merkel lost some electoral ground in a May 9 election, for example. And a separate bailout package for Greece, approved last week by the German parliament, was unpopular with many voters. Still, Ms. Merkel said she expects the parliament to consider the rescue package soon and to pass it.Skip to next paragraph
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"The euro zone's member states showed yesterday that we have a common political will to do everything for the stability of our common currency," Merkel said, according to an Associated Press report. "This is a determined and united message to those who think that they can weaken Europe."
As the largest economy in the eurozone, Germany would pay for more than one-fourth of the €440 billion fund.
Britain is not a member of the eurozone, and thus wasn't expecting to be drawn into this currency crisis. According to news reports Monday, Britain will oppose the planned €60 billion contribution by European Union members to the rescue fund. If some other EU nations joined in opposition, that money could be blocked.
The positive stock market reaction indicates that, for now at least, Europe's version of the TARP is expected to succeed.
Money might not be needed
But the rescue fund may also be tapped.
In fact, even if Greece and other debt-strapped nations follow through with fiscal austerity measures, that's no guarantee that the debt crisis will end. The austerity is expected to crimp economic output, making it hard to pay off their debts.
One alternative would be bailout money, to the degree that it's available. Another would be for Greece to opt out of the euro currency.
"Greece is essentially looking at a lost decade, given the austerity that its got to go through," Mr. Bryson says.
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