Das Bazooka

Major differences abound...this will be a bridge too far in the long term.

Feb. 12 (Bloomberg) -- European leaders closed ranks to defend Greece from the punishment of investors in a pledge of support that may soon be tested.

German Chancellor Angela Merkel and her counterparts yesterday pledged “determined and coordinated action” to support Greece’s efforts to regain control of its finances. They stopped short of providing taxpayers’ money or diluting their own demands for the country to cut the European Union’s biggest budget deficit.

While bonds rallied, the euro slipped and pressure is now on the governments to show how they would back up their words with action. The attention of investors now turns to a meeting of finance ministers in Brussels on Feb. 15-16.

“They’ve got to deliver next week,” said Andrew Bosomworth, head of portfolio management at Pacific Investment Management Co., which oversees the world’s largest mutual fund. “They’ve expressed the principle of solidarity and now they need to explain and quantify it.”

The European strategy echoes then-U.S. Treasury Secretary Henry Paulson’s 2008 effort to intimidate markets with financial force, said Goldman Sachs Group Inc.’s Erik Nielsen.

“It’s like Paulson’s bazooka,” said Nielson, Goldman Sachs’s chief European economist in London. “It’s a difficult balancing act -- saying something comforting to the market without committing money and hoping the market will take their word for it.”