The market seems believing that there is a simple solution to the European debt problem and blaming that politicians for not acting. I question that wisdom. To me there is no valid solution short term but through long hard cuts on social warefare.
One easy solution which everyone from Obama to Sarkosy to Cameron and Putin (except Germans) believe is for ECB to be the lender of last resort. The problems with this solution are two folds. 1. First, fundamental fairness. Who is going to decide buy which country's debt. Why help Italy not Spain? At the end of day, buying debt is a subsidy to the country. Second, ECB buying will incentivize politician to increase deficits. It is much easier to get elected by promising more warefare and tax cuts than cutting spending and higher taxes.
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