Time to bail?

Is a US style multi-billion euro rescue package a valid solution to the economic crisis in Europe?

In an attempt to show that Europe's economic powerbrokers are no less desperate than their US counterparts a collective Europe-wide rescue package has been mooted as a possible solution to the growing banking crisis.

Clearly a rescue package, speculated to amount to €300bn, would help ease the growing crisis, but there are several issues and complications that cast doubt over the idea that a US style bailout can be a valid solution in Europe.
 
The EU is not the United States, there is no communal budget from which the money can be raised meaning each country will have to agree to any rescue proposal before submitting its share to the pot. This means that any bailout plan would require something rare and practically unattainable in pan-European politics, widespread cooperation and agreement. 

While the US bailout caused fallout and disagreement it was between two groups who were split by personal political ideology but who still shared the same fundamental aim; to resurrect the US economy. Any European bailout would require the agreement of a great number of countries, who all have their own needs and agendas to service; it is worth remembering that a United States of Europe does not, currently, exist.

The speed at which cracks in the proposals for a collective rescue package appeared when it was first mooted by Dutch Prime Minister JanPeter Balkenende demonstrate the difficulties of pan-European agreements. Originally the idea was strongly supported by French President Nicolas Sarkozy, who was convinced of the need of collective action after the combined intervention of Luxemburg, France and Belgium rescued the Franco-Belgian bank Dexia, however his position soon changed in the face of opposition from, among others, Germany. 

Additionally because every potential contributor to the rescue plan has the freedom to set their own economic policies many countries are already taking unilateral action that flies in the face of a collective response. Europe's politicians are answerable to their public and the loss of a person's life savings is something the voters tend to remember the next time they are at the ballot box.  As such the priority of every European government is the protection of their own domestic banks first. 

These priorities mean that a number of countries have taken action that cast doubts over the possibility of a collective solution, for example the Irish and Greek governments have agreed to guarantee every deposit in their domestic banks. The guarantee from the Irish Taoiseach came without consultation with other EU leaders and has angered the British government as it led to many UK savers moving their deposits to the protected Irish banks, further weakening the already vulnerable British banking sector.

The final word on the subject is best left to Jean-Claude Trichet, president of the European Central Bank, "We do not have a federal budget, so the idea that we could do the same as what is done on the other side of the Atlantic doesn’t fit with the political structure of Europe."