European policymakers’ hopes of preventing the peripheral debt crisis from escalating further are continuing to focus heavily on the role of the European Financial Stability Facility (EFSF). Not only will the first bond issue to raise funds for the Facility take place this week, but speculation over a significant broadening both of its size and purpose has also intensified. But while there is some encouragement to be taken from the fact that policymakers have started to think about more radical solutions to the region’s fundamental problems, we are far from convinced that any of the proposed plans would bring the crisis to a close.
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