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The Euro Crisis: Big Rescue, Big Doubts

Europe’s latest bailout plan is so full of holes it may not work

This time is different. Really. That was the message from European leaders after the 11th debt-crisis summit in 17 months produced an additional €109 billion ($157 billion) in loans for deficit-bloated Greece, easier aid terms for Ireland and Portugal, and a retooled bailout fund to prevent markets from trashing Spain and Italy as well. The euro, as well as the distressed countries’ bonds, rallied.

Then doubts started to creep in and the markets teetered. The big concerns of investors and analysts are that the bailout fund is not financed well enough to handle a widespread attack on the bonds of several countries; that bondholders who had to sustain losses in the latest Greek bailout will suffer the same fate in Ireland and Portugal; and that the Greek crisis is far from over. Finally there’s the worry that Europe cannot act decisively enough to put this calamity behind it. As Graham Bishop, a London-based analyst, puts it, “The euro zone’s governance mechanisms seem only capable of achieving the barest minimum necessary to prevent an immediate meltdown.”