By Ray Fleming

RECENT criticism of the slowness of response by European institutions to financial and other crises was answered convincingly over the weekend by the “shock and awe” 750 billion euro stabilisation plan agreed in the early hours of yesterday morning. One third of this guarantee will come from the International Monetary Fund.

The need for a response of this kind became apparent last week as money markets showed increasing anxiety that Greece's problems might spread to Ireland, Portugal and Spain. The stabilisation plan answers this anxiety because it ensures that any default on debts by a member of the eurozone will be covered by the European Commission and other eurozone members states as necessary. Initial reaction in the markets was favourable, spurred perhaps by surprise that a part of the EU could get ahead of the curve in such an impressive way.

There remains concern that the eurozone has shown it has insufficient means of disciplining errant member states but for the moment the involvement of the IMF should take care of that problem. Dealing with the Greek crisis has not been achieved without casualties, most notably Germany's Chancellor Angela Merkel who in Sunday's North Rhine Westphalia elections received a rebuff from voters who think that Germany should not be taking a lead in bailing-out Greece. “Europe's future and Germany's too” was Merkel's reply, and she will be proved right in the long run.