It’s not just Italy anymore. Spain’s borrowing costs are rising. French bond yields keep ticking ominously upward. The market conflagration is threatening to spread to all of Europe. Yet European leaders — especially German Chancellor Angela Merkel — still refuse to give their blessing to the European Central Bank to fire up the printing presses and start guaranteeing the debts of sovereign countries. Instead, E.U. officials have now resorted to dreaming up convoluted bailout schemes.
Earlier today, Reuters reported that European officials were noodling the idea of having the ECB lend money directly to the IMF, which would, in turn, prop up the debts of troubled countries like Italy and Spain. “It could be one way of getting around the legal restrictions on the ECB,” said one E.U. official. (Note: Plenty of experts don’t believe these legal restrictions on the European Central Bank even exist.) But even that Rube-Goldberg plan didn’t last very long, as Germany soon shot it down. And so we’re back to square one. Lots of chaos, no relief in sight.