Mr. Colm McCarthy:

This is a reasonable view. Another view states the IMF should have kept out of it altogether and let the Europeans sort out their own mess. This is an increasingly popular view, needless to say, in China, India, Brazil and other countries which are now exposed. The critical point is that the no-bailout clause means haircuts. The logical corollary of stating there will be no-bailouts is that France or Germany will not pay for Belgium or Greece if it goes bust. We do not have a united states of Europe. This is not Texas and we do not willingly transfer tax revenues across international boundaries except in a very small way. The no-bailout clause in the original design of the eurozone made sense. There was no banking union, which did not make sense, but the no-bailout clause did make sense provided everybody understood what it implied. What is implied was that if one lent money to the Greek Government, the Greek banks or anybody else, one would get a haircut the minute they got into trouble. The abandonment of the no-bailout clause in May 2010 has fathered all of the antagonism ever since. If this had not happened Bild would have had nothing to write about Greece. The consequence of this would have been that various financial institutions in France, Germany, Britain and elsewhere would have had problems in 2010, but they would have had to have been dealt with by their own governments. Instead, the debt problems were laundered through the Greek treasury.

That is the source of all of these. There was nothing really wrong with the no-bailout clause. What was wrong was that they abandoned it.