The only trouble is that Spain, Portugal, and Greece are currently governed by left-wing socialist governments, not "right-wing" dictators or military regimes. What's more, the Socialists trounced the center-right in the most recent Greek elections in October 2009 in part because the conservatives were politically unpopular for pushing for an austerity package aimed at getting the country's fiscal house in order. From a New York Times article at the time:
In conceding defeat, Prime Minister Kostas Karamanlis said he had failed to persuade Greeks to accept the two years of austerity measures he had called for to steer the country out of its economic crisis. “The voters did not approve of this policy. It was their choice, and I respect it,” he said.
Mr. Karamanlis also stepped down as leader of the New Democracy Party, which suffered its worst performance since the restoration of Greek democracy in 1974 after years of military dictatorship. He said he would call a party congress to elect a new leader within a month.
Mr. Karamanlis, 53, called early elections last month, two years into a mandate dogged by corruption scandals and economic crisis, aiming to win a fresh mandate and stave off labor unrest. He had called for a freeze in public-sector wages to fight rising debt and unemployment, but he had difficulty pushing through important economic and structural reforms because he governed with a one-vote margin in Parliament.
Mr. Papandreou, 57, instead favored increased spending, including a $4.5 billion stimulus package to revive the Greek economy though infrastructure projects and environmentally sustainable development, while cracking down on tax evasion. Experts estimate that Greece loses $17.5 billion annually in unpaid income taxes and $13 billion in unpaid payroll taxes.
The victory by the Socialists here was a rare event for Europe, where the left has been losing ground and has often been unable to capitalize on the financial crisis for its own political gain.
But many Greek voters appeared to be voting against Mr. Karamanlis as much as for the Socialists. After two decades of Socialist rule, Mr. Karamanlis was elected in 2004 promising to restore faith in government.
For his part, Cramer failed to correct Matthews, agreeing with Matthews that:
You have a currency [the euro] that's made up of [countries run by] profligate right-wingers non-profligate, actually prudent somewhat left-wingers. I'm talking about Germany. Germany is the rock bed here.
Germany is governed by a center-right coalition led by conservative Chancellor Angela Merkel.
—Ken Shepherd is Managing Editor of NewsBusters. You can follow him on Twitter here
Still, the move supplied the decisiveness – and the big headline – the markets had been craving. The Dow Jones industrial average rose 405 points to close at 10,785 – its biggest gain since March 2009 – and recouped two-thirds of last week's losses. At its peak Monday, the Dow was up nearly 455 points.
Broader U.S. indexes outpaced the Dow's 3.9 percent rise, while gains in several European markets topped 9 percent.
The Standard & Poor's 500 index rose 48.85, or 4.4 percent, to 1,159.73. The Nasdaq composite index rose 109.03, or 4.8 percent, to 2,374.67.
The euro bounced back from 14-month lows around $1.25 on Friday to over $1.30 on Monday, reversing the ominous slides and sense of panic from last week.
The crisis had raised fears of a panic like the one following the collapse of U.S. investment bank Lehman Brothers in 2008 and prompted nervous banks to cut back on lending to businesses and hammered stock markets.
A weaker euro and financial and economic disaster in Europe would hurt U.S. exports, and the U.S. Federal Reserve pitched in by agreeing to make dollars available to the European Central Bank in exchange for euros. The ECB will then loan those dollars at fixed rates to banks in Europe; the interest eventually goes to the Fed when it swaps the euros back for dollars at the same exchange rate as the original transaction.
European banks need dollars to lend to companies across the continent. European companies with operations in the U.S. pay their employees in dollars and buy raw materials with the U.S. currency. Also, oil and other commodities are priced in dollars around the world.
But because of the debt crisis, private banks in the U.S. have been leery of making loans to banks in Europe. Hence the need for the currency swaps between the central banks.
Analysts warned, however, that the emergency bailout fund would do nothing to reverse Europe's soaring public debt – and could even worsen it.
"The last thing you give a drunk is another drink," said Jeremy Batstone-Carr of Charles Stanley stockbrokers.
"The process of providing a bridging facility for Greece and possibly other indebted nations will add significantly to regional debt and deficit ratios without actually solving the underlying problem."
EU officials said the next step was to more closely coordinate member nations' economies, including tougher rules to keep them from running up too much debt. The eurozone has a limit on deficits of 3 percent of gross domestic product, but that was widely ignored.
"The key missing pieces ... are steps to strengthen fiscal discipline and structural reforms," said economist Annunziata. "I remain skeptical on this front, as greater fiscal integration at this stage requires deeper political integration."
Still, he noted, some experts argue the "current crisis is exactly what was needed to trigger a new quantum leap in European integration. I hope that turns out to be the case."
European Union President Herman Van Rompuy said European governments need to consider pooling their national powers and create a joint economic government.
"We can't have a monetary union without some form of economic and political union and that is our big task for the coming weeks and the coming months," he said.
He said he would draft tougher rules for EU leaders to discuss in October that go beyond current EU limits on debt and deficit.
The core problem is near-zero economic growth, high unemployment and governments unwilling to take painful steps to get people to work more and longer.
Simon Tilford, an economist at the Center for European Reform think tank, warned that EU governments so far haven't come up with anything "game changing."
"What Europe needs is a growth pact because without growth, public finances aren't going to be sustainable," Tilford said. "The bond markets are going to be forcing them to make those kind of changes."
Even EU president Van Rompuy warned that the bloc risks irrelevance and the end of its expensive welfare programs if it can't speed up economic growth, forecast to expand by just 1 percent this year.
"With 1 percent growth we can't finance our social model any more. With 1 percent structural growth we can't play a role in the world," he told the World Economic Forum in Brussels. "We need to double the economic growth potential that we now have."
Many are skeptical that can be achieved.
Jennifer McKeown, senior European economist at Capital Economics, said the rescue package won't stop euro economies like Greece, Portugal and Spain from suffering "a long period of extreme economic weakness" and won't erase fears of a default or collapse of the euro.
"We still see the euro weakening further to around $1.20 by the end of this year," she said.
Others worried over the prospect of EU policymakers stepping away from the strict rules that underpin the euro.
Marc Ostwald, a market strategist at Monument Securities, said Monday's rewriting of the rule book "in just a couple of hours" could foreshadow "a lot more in the way of absolute risk priced into government bond yields."
The European Central Bank's agreement to buy government bonds also spurred concern that it had caved in to political pressure, ironically weakening a key euro institution in order to save the currency.
"It will be hard not to see this as a loss of credibility and independence for the ECB," Annunziata said.
Commerzbank economist Michael Schubert said the rescue could spur irresponsible behavior by other eurozone nations if they know there's a bailout when they overspend.
Dutch bank NIBC said in a research note that the only long-term solution for countries like Greece was an eventual debt restructuring – the polite term for a technical default, with lenders unlikely to receive anywhere close to the full value of their loans to the government.
___
AP Business writers Pan Pylas in London and Christopher S. Rugaber in Washington and Associated Press writers Frank Jordans in Basel and Matt Moore in Frankfurt contributed to this report.
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