Europe's Race To The Bottom: How Austerity Is Killing The Euro

Stock markets may have soared after central banks around the world, led by the Fed, got together in a rare coordinated action to provide more dollars to Europe's strained financial sector. But we also got an indication of just how bad things have become. There have been concerns for months that Europe's banks were having difficulty getting dollar financing, which is very important to the operation of banks in France and elsewhere, as financial institutions around the world became nervous about lending money to a sector saddled with large euro zone sovereign debt holdings of dubious quality. The scary thing about that problem is that it could have caused a financial crisis in Europe even without a major new event in the debt crisis (like an Italian default). For central banks to act as they did, the situation must have become extremely severe, or was at least deteriorating badly.

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