In Europe the debate over the euro rescue plan has been simple. Southern “Club Med” countries and other states in need of bailouts have been begging Germany to shut up about austerity and just give lots of money to its needy European partners — which is to say, themselves. And they don’t want that money to come with a lot of dreary conditionalities and bureaucratic requirements. If they thought they could get away with it, they would ask for suitcases delivered directly to party headquarters with small, unmarked bills.
Germany, meanwhile, has been reluctant to oblige until the neighbors change their spendthrift ways, attempting to avoid spending all its cash on bailouts that, if the neighbors don’t make the reforms they have so far resisted tooth and nail, won’t ultimately do any good. Yet thus far, both sides have taken for granted that Germany can afford the bailouts—the problem is one of will, not of means. But what if even Germany can’t afford the bailouts anymore? We may now be getting closer to just this eventuality. In a recent public statement, the Institute of International Finance reported that the European bailout fund is now running out of cash, and will now be unable to bail out another big country