Over the past three years we have had to get used to numbers with lots of noughts. Stimulus packages, bank bailouts and public debt figures have reached dimensions well beyond the imagination of the average person.
It also appears that dealing with these fantastic sums on a daily basis has led policymakers to lose perspective. What else could explain current speculation that the Euro rescue fund may have to be expanded?
In May the European Union and the International Monetary Fund had agreed to found the EFSF. Though the acronym smacks of science fiction, it is actually refers to the European Financial Stability Facility. Backed by guarantees totalling €750 billion, or just about $1 trillion (a number with a mind-boggling twelve noughts), it was meant to stop speculation on the collapse of the euro or any of its member countries.
But it only took the markets a few months to find out there was actually a great deal of fiction involved. For a start, the EFSF included commitments of €162 billion given by Portugal, Ireland, Italy, Greece and Spain – alas the very same countries it was meant to save. The PIIGS guaranteeing their own debt is like real pigs running a butcher’s shop – not very credible.