News Analysis – Europe’s Huge Rescue Raises Long-Term Doubts – NYTimes.com


And as details crystallized of the package’s main component — a promise by the European Union’s member states to back 440 billion euros, or $560 billion, in new loans to bail out European economies — the wisdom of solving a debt crisis by taking on more debt was challenged by some analysts.“Lending more money to already overborrowed governments does not solve their problems,” Carl Weinberg, chief economist of High Frequency Economics in Valhalla, N.Y., said in a note. “Had we any Greek bonds in our portfolio, we would not feel rescued this morning.”Such concerns may be part of the reason the euro fell back when American markets opened, after surging in Asian and European trading, to end the day at about $1.28.Another big issue is whether bailing out economies creates moral hazard. Other countries may continue to skirt the kinds of actions that would lower their budget deficits and debt loads — steps painful to the public and dangerous to politicians — because they too can expect to be rescued.

News Analysis – Europe’s Huge Rescue Raises Long-Term Doubts – NYTimes.com

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