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To recap, the European Union is comprised of 27 sovereign nations in a
common trading bloc, the purpose of which is to compete as a collective
more effectively with the world’s economic powerhouses of the US, Japan
and now China. It was born of the old “Common Market”.

Of those 27 nations, 16 have chosen to also band together under a
common currency – the euro. Responsibility for the euro falls to the
European Central Bank, and “euro-zone” membership comes with the
requirement to satisfy various economic criteria in exchange for central
bank protection (such as lender of the last resort insurance). One of
those criteria is that members must maintain a level of public sector
deficit of no more than 3% of GDP. In order to finance deficits,
individual members issue their own soveriegn bonds. There is no single
euro-zone bond. Excessive debt issuance from one member state
incrementally impacts on each member state via the devaluation of their
common currency.

Any sovereign nation can also go cap in hand to the International
Monetary Fund for financial assistance, as that is what the IMF is there
for. But the IMF also imposes strict criteria itself when it bails out
an economy, and one of those is a forced devaluation of that nations’
currency. In the case of euro-zone members, clearly this is not an
option. Thus the ECB must respond first. >>>