The EU Crisis In One Picture

The Economist has it on their cool "Daily Chart" blog. The full article is sub-titled "Is Germany bailing out euro-area countries to save its own banks?" The answer, of course, is "yes". This is why Germany is insisting on austerity throughout the union. This is why the ECB is intervening in bond markets. This is why the EFSF is providing loans until 2013, but not after. This is why Ireland, Greece, and Portugal are so unhappy. The entire EU response to the debt crisis is to construct policies that protect German -- and to a lesser extent French -- banks.

We've written about this before. When folks like Krugman are bewildered that the ECB's monetary policies are "one size fits one", they're absolutely right. But that's because this policy is about distribution, and about appeasing powerful domestic interests. Those are the banks.