The euro has completely broken down as a workable system and faces collapse with “incalculable economic losses and human suffering” unless there is a drastic change of course, according to a group of leading economists.
Europe is “sleepwalking towards disaster”, according to the 17 experts, who warned that over the past few weeks “the situation in the debtor countries has deteriorated dramatically”.
“The sense of a neverending crisis, with one domino falling after another, must be reversed. The last domino, Spain, is days away from a liquidity crisis,” said the economists. They include two members of Germany’s Council of Economic Experts and leading euro specialists at the London of School of Economics, all euro supporters.
“This dramatic situation is the result of a eurozone system which, as currently constructed, is thoroughly broken. The cause is a systemic failure. It is the responsibility of all European nations that were parties to its flawed design, construction and implementation to contribute to a solution. Absent this collective response, the euro will disintegrate,” they added in a co-signed report for the Institute for New Economic Thinking.
You cannot solve a debt problem by adding more debt. Are you listening Obama, Pelosi, Reid, Schumer, Kerry, Clinton, Boxer, Waxman, Rangle, Frank? Is anyone listening? Does anyone in the US government care about its own citizens?
The good will of the American people built over 200 years has been lost in the last 20. I now despise the Feds and the UN. All are evil and only interested in power and money. The only answer to the debt problem is to shrink, seriously shrink, the federal government. This will remove some of the money from Washington and will have the additional benefit of attracting the right sort of politician. The mere fact of so much money to manage (rec’d from taxes or borrowed, as they are wont to do) attracts just the wrong sort of character.
Surprisingly, he misses the key danger completely — France, or more specifically French banks, which are a group of bugs looking for a windshield. Their exposure to highly doubtful debt significantly exceeds the entire GDP of France. I’d put the over-under at about three years, and you can have the over. When they go, they’ll take the Fifth Republic with them.
[blockquote]The deeper problem can then be managed through a European Redemption Fund that takes over a chunk of the “legacy debt†left by the errors of early EMU, much like Alexander Hamilton’s sinking fund in the US to clear up the mess after America’s revolutionary war.
The proposal is based on a plan by the German Council of Experts. Each country puts all debt above the Maastricht ceiling of 60pc of GDP into the fund. Each would be responsible for its own debt but would be able to borrow through joint bonds, raising money on Germany’s credit card.
The debt would be paid off over 20 years, with each state putting up foreign reserves, gold and other collateral to ensure compliance. It is the opposite of fiscal union: the eurozone would return to fiscal sovereignty and, since the liabilities would be fixed and the fund self-liquidating, it would comply with Germany’s constitution.[/blockquote]
I am not sure I understand – even if Germany were prepared to max out its credit card to cover everyone else’s debt, if the nations’ national reserves of metals, currency etc have been used as security, what security is there for other future lenders to feel confident in lending to these countries.
Only if Germany were to be prepared [assuming it could manage it] to be a future lender as well would this work. Germans are presumably very nice, generous people, but why would they continue to write blank cheques? But I am probably missing something.
I don’t see that all these schemes really address the underlying problems of continuing over spending, and of the structural problems countries are having with inability to adjust which a floating currency gives them. Britain had the same problem until we broke free of the Sterling Area fixed exchange rate scheme years back.
I wonder if you have a solution Bart?