´óÏó´«Ã½

Ìý

After an announced bailout plan, commentators spell out the possible pitfalls still present for Europe.

that the Franco-German alliance - key to Europe's stability for more than 60 years - is starting to crack:

"One of the most telling, and the one that caused something akin to panic in both capitals, was the rumour that France might lose its AAA financial rating, even as Germany kept its. In the event, this was avoided, and the risk may vanish permanently if the eurozone deal is made to stick. That the downgrading of France was in the air, however, was no fantasy, nor was it malevolent. It reflected the two countries' relative economic performance and their banks' relative exposure to risk."

The what could go wrong if China was brought in to lend money:

"The euro's crisis boils down to this: national treasuries do not have enough spare cash both to guarantee outstanding debt and maintain their own credit ratings. Even mighty Germany cannot stand alone behind the whole euro zone.
Ìý
"Some hope that more money can be found from non-European creditor countries, such as China, by convincing them to invest in SPVs. Or perhaps the IMF could do more, particularly if China increases its contribution to the fund. But even if the Chinese were game, this raises a serious political question: does the euro zone want to be so obviously in hock to China just as it is fretting about Chinese firms buying up European ones?"

that the issue of central control of the European economy will continue to cause tension among the eurozone countries:

"Merkel spoke yesterday of what is needed to realise and entrench the rescue package. It was yet more Lisbon-style fantasy. She talked of imposing German überwachung, or political discipline, on the Greek public sector. How? When she and Nicolas Sarkozy smirked over Italy's inability to curb its spending, the message was clear. Something must be done about Italy. By whom? Merkel rejected a proper European central bank to bolster the single currency, but as France pointed out, how can a currency function without one?
Ìý
"... There is no way a drastic increase in the central control of the European economy will gain support from national electorates. Nor will they accept that the European parliament offers sufficient accountability. People will not be further divorced from those who run their lives and fix their taxes."

The that it isn't yet certain if banks will actually write off 50% of Greek debt:

"We won't know what kind of a deal the bankers actually cut with the eurozone until we know what the changes in coupons (the annual interest rate) and maturities (how quickly it will be paid off) will be. And these things haven't been decided yet. It could be that there won't be much of a haircut at all.
Ìý
"In fact, there may be a far smaller haircut than if the banks were just left to suffer default by market forces...
Ìý
"But if the banks and other private sector investors aren't really going to drop half the Greek debt, why were Mr Barroso, President Sarkozy and the rest selling this as yet uncalculated haircut so hard? Because they had to present something to pretend that Greece could be on the road to solvency. Yet it is not, and it won't be, not as long as its economy is tortured by the EU austerity programme and not as long as it stays in the eurozone."

On a more optimistic note, the US President that he's confident Europe has the economic capacity to meet this challenge, albeit with conditions:

"This week, our European allies made important progress on a strategy to restore confidence in European financial markets, laying a critical foundation on which to build.
Ìý
"Given the scope of the challenge and the threat to the global economy, it is important for all of us that this strategy be implemented successfully - including building a credible firewall that prevents the crisis from spreading, strengthening European banks, charting a sustainable path for Greece and tackling the structural issues at the heart of the current crisis."