Bild via Business Insider
Bild, a popular German tabloid, ran the banner image up there on its English-language home page today.
The "lion's share of that cash — up to 123 billion — is coming from Germany," the paper said. "If it is not paid back, the taxpayer will be left out of pocket. Just like with the Greek bailout!"
Just to be clear, the bailout announced this week is a basically a line of credit, and nobody has borrowed against it yet. Still, now that yesterday's honeymoon is over, markets don't seem so psyched about the bailout either.
Banks in Europe are still very nervous about lending money to each other. Insurance that pays off if European banks default on their debts is still relatively expensive. And the euro is still cheap.
Inevitably, the news of the bailout has been followed by talk of moral hazard — the notion that people and institutions who are protected against bad outcomes from risky behavior may be more likely to take big risks.
All the big corporate bailouts during the financial crisis made this a big worry in the U.S. Now that the EU seems to be saying that euro-zone countries are also too big to fail, countries may be more likely to throw fiscal caution to the wind and spend their way into bailouts.
EU officials are aware of the risk, and they're trying to figure out how to manage it. One possibility: Force euro-zone countries to give up some control over national budgets.
Under a proposal described by the WSJ, euro-zone members would review nations' budgets before they go to national parliaments. If a super-majority of euro-zone members votes against the proposed budget, it would be rejected, and the national parliament wouldn't get to vote on it.