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Out in the open …

Posted by Richard Sunday, March 08, 2009

We've all been thinking about it, and discussing the possibilities, but it is unusual for them up there to be talking about it.

But, according to Reuters, Germany's Economy Minister Karl-Theodor zu Guttenberg is openly saying that whole countries – and not just their banks – may have to be bailed out to prevent their collapse.

He was talking to the weekly magazine WirtschaftsWoche, who hastily adds – not entirely convincingly – that, "Luckily we're still a long way from anything that serious." Even then, although I do not know how much reliance you can put on a translation from the German, but the nuance of "still" makes you wonder.

Anyhow, Guttenberg had something more pressing – in his view – to say. That was to put on record his rejection of the idea of a joint bond issued by (or within) the eurozone. But once again, nuances come to the fore. He does not rule out a joint bond issue … merely one, presumably, by the ECB.

Whatever he has in mind, he also makes it clear that support should only be given to countries at risk of collapse, which also tells you something. If they start doshing out aid to specific countries – in whatever form they eventually decide – that will be a very clear signal that the situation is very grave.

Nevertheless, the "colleagues" are deadly serious. Guttenberg says that, "it may be that support measures will be necessary in future." He adds: "Just cynically allowing whole countries to fail would cost a great deal more." And that suggests that this too has been considered as an option, even if it has been rejected … for now.

It is not clear what is on the cards though. The best Guttenberg can offer is that, on the one hand, the "colleagues" don't want to "undermine efforts to maintain budgetary discipline in Europe." Thus they want collectively to "find flexible solutions for the countries that are really in danger."

This really does suggest that they don't yet have le plan. Either that, or they don't have the first idea of what to do … or both.