The latest proposal for making sure the eurozone is a place of positive economic growth where horror shows like the unemployment rates in parts of Europe’s periphery are but a distant memory, is a solidarity mechanism to promote and finance policy reforms towards competitiveness, growth and jobs. But is it even necessary?
The European Council has mooted that struggling countries can take a cheap loan in exchange for signing up for an economic reform programme.
For a start, that does not sound entirely different scheme, generally speaking, from the bailouts agreed already for Greece, Portugal, and Ireland. It also has similarities with the European Central Bank's Outright Monetary Transactions scheme, although that is not a tool has not been tested yet.
Moreover, Europe's bailout vehicle, the European Stability Mechanism already offers a wealth of options when it comes to providing cash and support to stricken sovereigns through its ability to intervene in sovereign debt markets.
It’s right that the eurozone members stand behind others that cannot fund themselves in the bond markets at an affordable rate even if it is only for entirely the selfish motives that they do not want their own borrowing rates tarnished by association.
But what is on offer here is a bailout by another name before an full bailout is deemed necessary.
Investors will not fall for it. And although the EU can point to Ireland as its economic reform golden child, with the country set to exit its bailout programme shortly, Portugal and Greece have hardly been ringing endorsements for the EU's ability to handle a eurozone sovereign's economic rehabilitation.
No sovereign in its right mind would apply for something which looks suspiciously like a bail-out, without actually needing it. There are already assistance programmes in place through a wealth of supranational institutions — The IMF, the EU, the ESM, the EIB, and the World Bank to name but few. It's hard to see what the European Council's proposal offers that is of any benefit.