mr president response to the sovereign aspects of the economic crisis was slow
initially the markets punished inadequate responses
recently there has been a respite
now some bond interest rates are creeping up again into the unsustainable zone
rescue arrangements that were made have been shown to need change and with the best will i doubt that the next attempt will be one hundred percent correct let alone future-proof
therefore we need a permanent funding mechanism that is flexible not least to enable early intervention if that is the most effective remedy
this is not such a wild idea
the imf does it
but of course there have to be boundaries priorities and governance
so we need a treaty change that enables evolution not a treaty change that leads to embroilment in what is meant by indispensable to the euro area as a whole which at the very least suffers from size discrimination
even strong euro area countries need the stability mechanism because of the interconnectedness of the banking system and sovereign debt
it is not a coincidence that the ecb calls for a fund large enough to cope with euro area bank recapitalisation
and on interest rates a balance has to be struck between sustainability and moral hazard but the end-of-the-day position cannot be that member states extract rent greatly in excess of costs
