A half-hearted approach by the EBC will achieve little. Even full-blown “shock and awe” will only buy time. That’s because the real instability stems from fears euro-zone governments will impose losses on those holding individual country bonds if debts prove unsustainable. Those fears are mounting as the growth outlook deteriorates. Italy’s announcement of new austerity measures Friday may help address concerns over the deficit but could actually worsen the short-term challenge of growth.
That’s why the second part of the crisis resolution requires a vast expansion of the euro zone’s bailout facilities and most likely a move by European countries to guarantee European Financial Stability Facility’s bonds, effectively turning them into genuine euro-zone bonds.
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(WSJ) The Need for Resolve in Europe
A half-hearted approach by the EBC will achieve little. Even full-blown “shock and awe” will only buy time. That’s because the real instability stems from fears euro-zone governments will impose losses on those holding individual country bonds if debts prove unsustainable. Those fears are mounting as the growth outlook deteriorates. Italy’s announcement of new austerity measures Friday may help address concerns over the deficit but could actually worsen the short-term challenge of growth.
That’s why the second part of the crisis resolution requires a vast expansion of the euro zone’s bailout facilities and most likely a move by European countries to guarantee European Financial Stability Facility’s bonds, effectively turning them into genuine euro-zone bonds.
Read it all.