The eurozone bail-out had three aims. It has failed on all of them The EFSF has provided rescue financing to troubled eurozone nations. To my mind, however, it was a makeshift construction which always looked insufficient and highlighted the basic problem that the eurozone lacks a single government. The convoluted process of the EFSF's creation, surrounded by much open debate and speculation, contributed to an extended period of crisis, unsettled markets and a generally unhealthy financial market environment. Even the structure of the rescue vehicle had echoes of the sort of structured finance vehicles that caused so much of the credit crisis. The fact that a downgrade of a AAA member government could potentially reduce the fund's scope to provide finance made the EFSF itself look potentially vulnerable to the sort of vicious spiral of downgrade, higher borrowing costs, weaker finances etc seen within the troubled nations it was aimed at rescuing. There was also the problem that whilst providing financing to government, it did not solve the major problems of the banking systems of the peripheral countries. Thus it was not until all three of the weakest eurozone members, Greece, Ireland and Portugal, had had to be bailed out (Greece twice), and the ECB acted through its three-year financing operation to help the banks, that the situation was stabilised. But this chaotic approach to crisis management is a consequence of there being more than one government involved and the terms of the European treaty that did not allow eurozone nations to be "bailed out." Thus the EFSF had to be a bail-out that wasn't a bail out, with all the inane consequences that that had. From here, some time has been bought, but the euro's effect of making decades of, likely unachievable, austerity the only way for the weaker nations to become competitive has not gone away. Without closer political union, this construct is likely see strains re-emerging. In my view eurozone governments should have (probably secret) contingency plans to enable a country or countries to exit the union (as complicated as this is likely to be). Such planning probably seems unlikely however given the ideology behind the single currency. Simon Ward chief economist at Henderson Global Investors Eurozone monetary trends are improving at the margin, suggesting that the ECB's rate cuts and liquidity injections have been at least partially effective and consistent with a stabilisation of EMU-wide output by the late summer. A recovery, moreover, has occurred in the periphery as well as the core in the last two months, a development that - if sustained - could herald an end to recessions in the former group by late 2012. The risk, however, is that the lagged impact of the ECB's rate cuts and liquidity injections will be offset by the recent renewed rise in financial tensions, reflected in wider peripheral / core spreads. Further ECB rate cuts are warranted to reduce this risk. James Foster Co-manager of the Artemis Strategic Bond fund The LTRO [the ECB's programme of cheap three-year loans] is very explicit support for the banking system and highlights the critical nature of the sector to the whole European economy. Insofar as the two tranches to date have prevented another full-blown credit crunch, it has worked. But it causes all sorts of distortions elsewhere. And will there need to be more? I suspect there will, but only time will tell. Compiled by Darius McDermott of Chelsea Financial Services