January 27th, 2012
04:00 PM GMT
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Davos, Switzerland (CNN) –
“Bazooka” is competing for word of the year so far. As in, Europe needs to bring out its big bazooka to deal with the debt crisis in which it has been embroiled for nearly two years now.

Mexican President Felipe Calderon, head of the G20 group of countries, brandished the word with gusto at the World Economic Forum in Davos, declaring “we need to take out the bazooka immediately before the powder gets wet.”

Calderon compared the European situation to the economic crisis in Mexico in 1995. That crisis – referred to as “the first financial crisis of the twenty-first century” – exploded after a boom time and the influx of capital. The country was then bailed by the International Monetary Fund, and another country’s money – in this case the U.S. So far, so familiar.

Calderon pointed to the return of confidence that followed the international aid package, noting the same needed to occur in Europe. “The problem is not the money, the problem is the confidence,” he said.

And this is true. The capital markets - the investors who dictate the price of eurozone’s funding costs - have been losing confidence in the bloc’s ability to create a viable route out of the crisis. Hence, the rising costs of funding Italy; and the unrealistic funding costs of Greece, Ireland and Portugal (check our eurozone crisis map for details).

The world now knows the bazooka entails saving Greece, and building a firewall around Italy so the eurozone’s third largest economy doesn’t collapse the entire bloc. The target is clear. But where’s the weapon?

The bazooka had a flirt with the capital markets last year, when there was speculation Europe’s bail-out fund would be turbo-charged into a pot of EUR1 trillion. Markets rose on that idea, but then retreated when it was clear it had stalled.

Now, the fiscal compact is to be the savior of Europe. But still the funding costs of troubled eurozone countries remain unpleasantly high and the deal is far from signed off.

Pressure has been building on the European Central Bank to increase its sovereign debt buying program, but its president Mario Draghi gave no indication that was going to happen when he spoke at the forum. Instead, he pointed to the need for European countries to trust each other. The fiscal compact, he noted, was a “the first step, though timid, though hesitating, toward a fiscal union.”

But even if the ECB massively increased its buying program, would that be a bazooka?

Perhaps German Chancellor Angela Merkel said it best in her opening speech. Referring to the increasing funds being injected to the eurozone’s bail-out funds – and with clear frustration - she said: "People say it has to be double, then it has to be triple, then we will believe you."



soundoff (26 Responses)
  1. EOD

    Pictured item is not a bazooka, it's a recoilless rifle-a minor point but a bit of attention to detail would be nice at times.

    January 27, 2012 at 5:49 pm |
  2. FromBelow

    Is an image that's 5058×3130 and 2.56 MB in size really necessary?

    January 27, 2012 at 6:07 pm |
  3. alex

    going into the euro!? the saying: together we stand strong, after the euro, together we fail, and still all do not fail, but some get dragged into it! an economical definition it is becoming!!!!!!

    January 27, 2012 at 6:17 pm |
  4. cacalips

    Oh yeah, MExican leader is calling the shots in world events. Any one see how his country has been going..oh since... the dawn of time. LOL FAIL BLOG WORLD. Ur all gonna die.

    January 27, 2012 at 7:05 pm |
  5. Edmundo

    You get to see the consequences in Mexico of thinking in a violent way. Mr Calderon got out the bazooka to combat the drug dealers, and now the country has sank into a terrible social violence. Better think about it before attempting to use any kind of bazooka.

    January 27, 2012 at 7:37 pm |
  6. Ayes

    Yep, you can think of Mexico not doing so well these days, but you should think twice and look at how controlled is the debt they have compared to any of the troubled Europe folks....and even the US.

    January 27, 2012 at 7:58 pm |
  7. Scott

    First the media sent us all a doomsday message of how our economy is going to collapse, of how we need to tighten our belts, of how China is going to take over the world. Then, after prophesying all this doom and gloom, the media sends reports mabout how it's a lack of confidence in the western market that 's causing the damage.

    Well, The media who are blaming a loss of confidence on our economic situation are primarily responsible for the problem. I didn't know about the recession and the loss of consumer confidence until the media told me
    so. I question the extent to which this supposed crisis would have happened, had the news not known about this.

    Dear media, the people trust you more than they should. Give the americans some kind of hopeful incentive or credit for the charitable work they do. Stop sending the message that America is hopeless and China is going to rule the world. Otherwise it makes you look like you're paid by the Chinese.

    January 27, 2012 at 8:00 pm |
  8. James

    Who cares. Europe is irrelevant

    January 27, 2012 at 8:06 pm |
  9. blue

    Buddy, this is not a bazooka but a recoil-less rifle on that picture. Another fail by CNN....

    January 27, 2012 at 8:14 pm |
  10. PB

    Can somebody please change the picture? That's not a bazooka. It's really distracting us from the article I guess.

    CNN has good articles, Blue, but the problem is whoever does the headlines and pictures. They're too often wrong or very misleading. But hey, in all fairness, you have a ton of variety here: science, foreign policy, economics, historical, etc. news, it's hard to get it all right... Some uni needs to offer an MAE, or a Master of Arts in Everything for whoever has the news website job.

    January 27, 2012 at 9:19 pm |
  11. Professor Trollworth

    Yes, a 5058×3130 and 2.56 MB image is completely necessary. It helps show the awesomeness of the explosion. Too bad it's not in color.

    January 27, 2012 at 9:26 pm |
  12. Henk

    I know the US media would like Europe to build massive debt by promising Trillions but as Merkel, Sarkozy and van Rompuy etc say. Europe will take it step by step to improve fundamentals. This will take years to build and improve upon. But it`s already looking more stable then a 1 or 2 years ago. The Fiscal compact is about to be signed and will be put into place in the following months. The EU will get actual powers to oversee and correct member budgets. This will be followed by the new permanent stability mechanism. And the soon to be announced extra job creation projects by the EU. Many other projects are ongoing to improve European fundamentals but most importantly Europe is also slashing budgets to live within it`s means. All the US has done so far is borrow more and more having their debt now reach over 15 Trillion. Let them laugh all they want. They will get into trouble with that quickly rising debt sooner or later.

    January 27, 2012 at 11:21 pm |
  13. asyousakforit

    What people doesn't know is that the bazooka is already out, ECB is desperately buying bonds out of sight. Look at the Italian yield and tell me who is buying. Investors looking for another haircut or the ECB????

    January 28, 2012 at 12:05 am |
  14. jrw

    for people who is complaining about the image size, its about time to invest in a new computer and a better ISP. This is 2012 and the average pc has 4 gig ram and 1 gig video and i7 processor on the low end,

    January 28, 2012 at 12:14 am |
  15. quax

    load, aim, fire, BOOM – and at a moment's notice all sorrows are gone...

    Keep on dreaming, CNN!... maybe the economy does not need more "confidence" – maybe the media need to relearn "patience"?

    January 28, 2012 at 1:39 am |
  16. el motero

    Confidence? Sure. Let's see... The EBC breaks European treaties and their own internal rules to bail out banks and countries – and does this with the transparency the the soviets would be proud of. Banks, with the blessing and encouragement of the EBC, their central banks and governments in order to misrepresent or “embellish” their financials (Orwellian for fraudulent financials) in an attempt to give credence and since this was not enough: Engage in desperate if not pathetic attempt to rally “confidence” with a slew of mockery of "stress tests". The average citizen would and should wonder why bother with "stress tests" or increase reserve requirements since the EBC will just keep throwing unlimited money at ANY bank at negative real interest rates. Surly enough these self proclaimed “iluminiti” are attempting to keep their fraudulent charade going despite gross insolvency, incompetence and financial ruin and solve this with more money (printing) !! Naturally, such "brilliance" is an attempt to unselfishly “save us” OR rather save themselves, and not unlike a pyramid scheme those “down the line” with end up with nothing – and those down the line won’t be Draghi or friends.

    January 28, 2012 at 2:03 am |
  17. Henk

    El motero the US is no different with all it`s ways to stimulate the Economy. QE1, QE2, helping Banks with hundred of Billions worth of loans during the crisis in 2008. Keeping federal interest rates at zero now extending it till 2014 or beyond. Massive stimulus projects (US budget deficit for 2011 was 1.4Trillion Dollars). And then when Europe does something big it`s all evil. What a joke.

    January 28, 2012 at 2:58 am |
  18. Cryses

    I have a PC that is almost ten years old..the pic displays just fine. That is a fine, fine weapon and I can only think of two words having seen it..."Zombie Apocalypse".

    January 29, 2012 at 1:42 am |
  19. TheOldOne

    The problem in Europe is the same as all over the DemonCrazy'c world: Creeping socialism, a bottomless pit used to buy the votes of the non-productive, those who do not contribute to the economy. The more money thrown in there, the bigger the pit becomes. It feeds on money. And as long as a lazy tax consumer's vote counts the same as that of an innovative tax payer with some initiative, the problem will just get bigger.

    January 29, 2012 at 3:10 am |
  20. Scott

    No pictures of an actual bazooka available? A bazooka was a US anti tank weapon... The pictured weapon isn't even US... it Russian lol

    January 29, 2012 at 5:49 am |
  21. Carl van Zijll de Jong

    Comparing today’s economic upheaval with a single economic event of the past is foolish for the simple reason that not two situations are totally the same. The present economic upheaval has taken on the form it have is because of the scale by which we violate the “Laws of Economics”. Therefore, the only way to recover from our economic trespasses is by adhering to the Laws of Economics. Any other way to correct matters will be curing the symptoms but not the cause. For your information Google “The World Monetary Order”.
    http://theworldmonetaryordertocome.blogspot.com/2010/11/introduction.html

    January 29, 2012 at 8:26 am |
  22. mipolitic

    all that i know is that the euro can not afford to make bad friends, and with the arab spring and iran and the west bank and all the mid east tensions , the euro will step on toes and that will cause the fracturing faster than they can pull out the fire hose. putin would smile to push buttons after march . ya i am sure the euro is smoke and mirrors. its over before march 2013

    January 30, 2012 at 2:21 am |
  23. el motero

    Henk, the US is more likely to implode than Europe and it hasnt because the US Dollar is strangely enough still the worlld's reserve currency – especially in the commodities market – be it fish oil or crude oil. It is just a question of time for a small spark – so to speak. As of now the ECB, FED, BoE and BoJ – interestingly enough the "strongest" currencies are ALL repeatedly engaging in QE and this is a concerted effort. The reason is simple: To manipulate the markets (as always) and avoid the distruction of any one of the "strong" currencies. There is NO lack of "liquidity" – quite the contrary. Suppose the ECB were not to engage in QE and be firm on currency long term value and stability. Thus, the Euro could be the currency of refruge – and a lot of dollars, BPs and Yen would be filling Euro currency banks. This could cause damage to the dollar and even lead to OPEC nations to price in Euros – and thus it would be the end of the dollar as we know it. Whether the EU wants a strong euro is another topic, but historically the BP in it's hayday was strong and that did not hurt their economy – quite the contrary

    January 30, 2012 at 12:54 pm |
  24. Olivihaffko kee

    CNN has good articles, Blue, but the problem is whoever does the headlines and pictures. They're too often wrong or very misleading. But hey, in all fairness, you
    have a ton of variety here: science, foreign policy, economics, historical, etc.

    http://biogeniste.org/

    February 28, 2012 at 6:08 am |
  25. mediatorbucurestimustateanu.ro

    Very interesting. Objective analysis are hard to find now that the press is concerned with information handling more than

    March 27, 2012 at 8:02 am |

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