Imagine a situation in which 49 other states are forced to unite together to help forestall the imminent insolvency of California, and you’ll get a good idea of the limitations inherent in the EU "rescue proposal" for Greece and the other "PIIGS", as I seek to explain in this interview below. The obvious rejoinder to such a hypothetical proposal in the US is, "What about the Federal government? How can 49 other users of the US dollar help mitigate the contagion impact from a California bankruptcy in the absence of participation from the issuer of the currency?"
Likewise in the euro zone: The ECB is more than capable of injecting net financial assets denominated in Euros into the EMU system. In fact, it is the only entity that can make truly vertical transactions in euro.
So at present what is it doing? Managing liquidity to ensure the interest rate stays where it wants it and likely using the Fed swap lines to support a currency which has to go down to ensure any kind of growth in the region. It’s no wonder that the markets are now testing the package’s ultimate credibility.