2012-04-29T10:03:09+0000

All|Economic Data|Europe|Regions

EU economy

Gerry Davies

4 Comments

  1. This whole crisis could be over with a joint Euro bond. Yes, Germany doesn’t want to pay higher rates, but why should they enjoy the full benefits of being in the Euro, without protecting their own interests as well as the less industrialized nations of the Euro? If there was a joint Euro bond, the prosperous countries with sound fiscal policy will be paying a slightly higher rate, while the less fiscally countries will be paying a considerably lower rate. This lower rate with sound policies put in place would have a better success rate at the countries getting back in line a lot quicker than having them hanging out in the wind in the bond markets. So the Germans have to pay 4% over the next 10 years while the mess gets sorted out. I am sure the rate would come down soon as countries get back on track and growth and unemployment gets back to normal. It is better than having the whole zone break up from disparities.

  2. take away the discipline of high yields and you can kiss goodbye to fiscal rectitude

  3. I see your point Gerry, but something has got to give. Do you think Spain is strong enough to pull through? I am not sure if there would ever be an agreement to such a plan, but if there was, there would definitely have to be a strict policy in place that would not allow countries to continue with such huge deficits. I am sure that with lower rates it would make it slightly easier to get things under control. I know that my opinion here is over simplified, but I think there has to be some way. I am sure that the ECB has a lot more ideas and a lot more room to maneuver. The LRTO loans came as a surprise to the market and even the after effects also surprised. Real money has not exited the Euro for dollars, which seems to me the market thinks that there is a way out. The next two years will be a true test of that faith. I really don’t think that there is any way the ECB will fail to preserve the Euro.

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