The Seven Hundred Fifty Billion and Change

The Telegraph says that European leaders have agreed to bail out Spain and Italy to the tune of 750 billion Euros. "Under the proposed deal, two European rescue funds – the £400 billion (€500  billion) European Stability Mechanism (ESM) and the £200 billion (€250  billion) European Financial Stability Facility (EFSF) – will buy bonds issued by European countries. ... Under the new plan, the money in these funds will not be given directly to governments but will instead be used to buy up debts on the financial markets."

In the other news, Mubarak is reported clinically dead after a stroke. The Pakistani Prime minister has been disqualified from running for office by that country's Supreme Court. And President Obama has been lectured to on subjects unknown by Vladimir Putin.

Italy to be bailed out? Yes Italy. The Guardian's John Hooper reports that Italy has to be helped out because it "has become incapable of sustained, significant growth."

It has been at a virtual standstill since the start of the 2000s. In the first quarter of 2012, it shrank 1.4% year on year and last month, the OECD forecast that between 2012 and 2017 Italy's GDP would grow by an average of only 0.5% per annum, the lowest rate among more than 40 countries for which it made forecasts.

What the crisis has highlighted, moreover, is that Italy's growth potential is to a worrying degree restricted by deep-seated problems that have more to do with society than the economy. They include widespread corruption, an educational system that is turning out fewer graduates than almost any in Europe, courts that fail to offer investors judicial security and a deeply-ingrained view that women should not return to work after they become mothers.

Without growth, however, Italy will be in no position to start paying down its vast public debt, which is expected to top €2 trillion (£1.6 trillion) this year. As Reichlin notes, a stagnant economy also adds to the pressure on banks by increasing the danger of default by companies to which they have lent.

Maybe more borrowed money will solve that problem.

Max Hastings, the historian, reflecting over the events of the last weeks, wrote reflectively about his family holiday in the Daily Mail.

We spent most of yesterday on a beach in Devon — the family and me, that is. The sun was shining, the sand golden; gentle surf washed the shore against a backdrop of soft woods and green fields rising from the shore.

I mention these holiday scenic details only to make the point that our world yesterday — and yours, too, I expect — looked pretty much the way it did the day before and, for that matter, in years gone by.

Because this is so, because no bombs are dropping, nor Viking hordes sacking villages nor dinosaurs roaming city streets, it is difficult for us all to get our minds around the notion that hell is a’popping; that Europe is in the early stages of what will probably prove its gravest and most frightening tumult of our lifetimes.

Nearly a hundred years ago today, another Englishman, contemplating a familiar Londons scene, had similarly grim thoughts. Sir Edward Grey, the British Foreign Secretary, looked out of his palatial, imperial London office and said, “the lamps are going out all over Europe. We shall not see them lit again in our time”.

Grey was more prescient than he thought. How could he imagine that just when the West had won the Cold War, the top priority of its exalted leaders would include the phase-out of incandescent light bulbs?  First all over the EU and then the United States?

There is in that obsession with the trivial -- pursued relentlessly in the midst of the collapse of demographic, economic and military strength -- something of the moral of the age.  A civilization completely consumed by political correctness, which required counseling for the merest shock, which believed it would preside over the End of History, is now bankrupt, unable to defend itself and without a single darned light bulb in the hardware store. What lesson was it? Perhaps it is this: never mind if you lose your pants as long as you can save your face. Or as someone else put it, those whom the gods wish to destroy, they first make mad.

Never mind. Tomorrow is another day.  Open thread.

  1. Where is Europe going to get the money to bailout Italy and how long will the relief last?
  2. What other good news are we expecting from the Arab Spring? In particular where does Egypt go from here?
  3. How easily will NATO be able to ship out its heavy equipment via Pakistan or via the northern route controlled by Russia?


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