The problem is a nation cannot resolve excessive borrowing with more borrowing. Whether it comes from EFSF, IMF or where ever.
Banks and international lenders will end up taking a massive hit either by default or design.
The age of wanton profligacy has come to an end and nations will have to learn to live within their increasingly limited means.

There is an alternative, though. Sovereign nations take back power from the markets, by enforcing social responsibility and by taxing the living hell out of their profits – bring on the Tobin tax.

Granted this is pie-in-the-sky, would require firstly the political will, and secondly a co-ordinated global effort to make it workable.

But, I think Kerry put it well in saying that the “bond markets are shutting out Europe” – I think there’s a political as well as a commercial rationale to this, a wilful attempt to bring down the Euro.

In reality, in the short term we’re likely to see a further evisceration of the sovereign state, and all those other nice chapters and verses of the neoliberal bible. I think that there’s a mindset out there in certain circles that even a barely functioning state represents “wanton profligacy”. In the medium term, I think that the free market system is going to collapse under the weight of its own contradictions, just as Soviet communism did.

I agree with the vast majority of that Niall, but I think that if the will was there to save the Euro, from Berlin or Brussels that they would have taken the necessary steps. The no’s for European economies are truly atrocious and German and French banks are dire as well. The markets are being realistic in raising rates. It is the EU that has forced them over the last few weeks.

The above circus of the IMF bailing out the ECB’s work is just another example of how ineffectual the EU is. The EU cannot raise 750bn for this fund but are confident that the several trillion needed over the next 18 months will appear. Whether one is a free market loohlah or a Communist hardliner, when one looks at this, it just shows there is nothing backing the Euro at the moment.

I agree with you Niall, the tobin tax is pie in the sky.
First, it won’t work unless it’s applied to every country around the world.
Second if it was applied it would end up being paid by consumers and ordinary domestic taxpayers.
With respect to free markets collapsing, I think it is evident that it is profligate nations that are collapsing.
The graphs shown on the linked article display Irish exchequer spending for the past 30 years and lay to rest the myth that FF gov’s of the past decade behaved prudently.
It is clear from this that over decades gov. spending has increased expotentially and this type of spending is mirrored across Europe. Sooner or later things had to come to a head.
http://trueeconomics.blogspot.com/2010/11/economics-171110-road-we-traveled.html

I read an interesting piece by the Polish Foreign Minister this evening, where he pointed out that countries like Japan and the UK get away with paying substantially lower bond yields than the likes of Spain, despite proportionally higher indebtedness:

http://www.msz.gov.pl/files/docs/komunikaty/20111128BERLIN/radoslaw_sikorski_poland_and_the_future_of_the_eu.pdf

Why is that?

Sikorski attributes it to a nebulous “investor confidence”, but personally I’m not so sure. Certainly, the institutional structure in the UK favours the “markets” to a great degree – the implication in the piece being that the EU’s institutional structure needs to inspire similar “investor confidence”. I still can’t shake the feeling that this “debt” is being used as a hammer and anvil to reshape countries, such as ourselves, who would be culturally resistant to Thatcherite “reform”.

Lest we forget, our sovereign debt problems were rendered chronic and unmanageable by also taking on private banking debts. It’s not the sovereign state that has failed here, it’s the “free markets”. The sovereign state put a noose around its own neck by extending its nanny state instincts to the financial sector, and enacting the bank guarantee.

This isn’t the time or place for the discussion, but I still maintain that neoliberal capitalism is rotten to its core and intellectually bankrupt, just like Soviet communism, and that it’s doomed to failure, just like Soviet communism. Unfortunately, I fear that we’re going to find this out the hard way.

Think you should have a look at this.

http://www.davidmcwilliams.ie/2011/11/30/small-savers-will-pay-price-if-euro-goes-into-meltdown