Euphoria fading on the EU sell out to Germany

Friday's late night deal, or more exactly the one finally struck in the early hours of the following day, is beginning to receive the critical attention it deserves, rather than the knee-jerk approval initially offered by the markets. The following is from an article by Irwin Steltzer in the New York Times, linked here:

The pressure to do something was irresistible. And what they did was to multiply the moral hazard created by the initial bailouts. The European Financial Stabilization Facility will be allowed to lend €500 billion, rather than only part of that amount under the initial arrangement. And the fund will be extended beyond its planned expiration date of 2013. It seems that stronger countries such as Germany and France will provide callable guarantees, but weaker countries will have to contribute hard cash, although how that drain helps them to grow is unclear. The fund will be able to buy newly issued sovereign bonds at auction, but not older issues held by the ECB, which was hoping to offload the €77 billion in bonds it acquired to support the prices of troubled countries' bonds.