Europe’s banking crisis: Is the rescue too late?

“Forget the Black Death,” said Bill Emmott in the London Times. Europe is facing its darkest days now. According to Mervyn King, governor of the Bank of England, the current financial crisis is worse than the Great Depression. For months, European leaders have been avoiding massive action, but now even German Chancellor Angela Merkel finally seems to understand the severity of the situation. She voluntarily spent last weekend in the company of French President Nicolas Sarkozy, a man she detests. The two have been at odds over the euro crisis: Merkel wants to restructure Greece’s debt, and Sarkozy doesn’t. Sarkozy wants the European Central Bank—i.e., German taxpayers—to bail out French and other European banks, but Merkel doesn’t. After their meeting, the two declared that they had reached an agreement on recapitalizing the banks. But they declined to provide specifics, saying the measures would be announced later this month.

How long can we keep kicking this can down the road? asked Laurent Cohen-Tanugi in the Paris Les Echos. European leaders seem perfectly happy “to deny reality and put off to the last possible moment actions that numerous experts recommend and that the markets expect.” We’ve known for months that the banks that are exposed to Greek debt need shoring up, but “only now, in the last couple of days, when we are once more on the edge of the abyss,” do the politicians act. And even then they don’t tell us what they’ve agreed to do! Their procrastination carries a real cost to all of us, in a prolonged recession—and to them, in a loss of credibility.

Blame Germany, said the Barcelona La Vanguardia in an editorial. It’s Merkel who insisted on forcing fiscal austerity on Greece without any European investment plan that could have helped spur Greek growth. Thus punished, Greece not surprisingly choked and suspended debt payments. So now, “what would have been merely a manageable problem has blown up into an economic and financial crisis that could have a global reach.” Maybe Merkel bears the larger portion of the blame for the delays and blunders, said Andrea Bonanni in the Rome La Repubblica. “But in his role of servile cavalier to the chancellor, the French president also shares responsibility.” The truth is that both leaders lack the skills for the roles they are trying to play. “After two years of steering the European ship through the financial storm, the results of the Franco-German partnership are mediocre.” It’s still far from clear they’ll be able to keep us off the shoals of disaster.

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But Germany has legitimate concerns about moral hazard, said Hugo Müller-Vogg in the Hamburg, Germany, Bild. “It’s scandalous that the men in pinstripes have once again gambled themselves into a corner” and expect us taxpayers to pay their way out. After all, no one forced the bankers to buy Greek bonds. Had they earned record profits, they’d be keeping all their winnings, but because they lost, we’re all supposed to help them out. No thanks. If we bail out the banks, they’ll have to pay us back—with interest. “Greed should not pay.”