Bloomberg
December 14, 2011
Travel agents started to buy tourist services in potential replacement currencies such as the drachma or lira. Central banks took precautions and one of them was said to have shopped around for banknote printing capacity. Traders even asked whether the euro would survive until Christmas.
So what has last week’s summit of European leaders offered to save the merriment of the holiday season? Some respite, but not much beyond it. Most stock markets have already resumed their declines.
To solve the current crisis, four things are needed: a deleveraging of governments; a return of growth; confidence in financial and capital markets; and an institutional framework that backs policies to achieve all of this.
There are two schools of thought on how to get there. The U.S. approach relies on monetary easing: bringing liquidity back into the markets to make them operate properly and to support growth. By contrast, the German (and now European) way calls for institutional austerity in a bid to create sound public finances as a basis for economic expansion. Each approach has its advantages and drawbacks. Ultimately, however, adherence to one school or the other has much more to do with a nation’s historical experience and political interests.
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1 comment:
Only 4 ways? Here is a fifth!
Since all current rescue efforts are treading in troubled waters (Greek PSI, IMF's funding by ECB, paid-in capital of ESM and EFSF leveraging), I revert to a proposal which I had first made in the beginning of the year. At that time, it was meant only for Greece. At this time, one might as well consider it for all banks. See link below.
http://klauskastner.blogspot.com/2011/12/since-all-current-rescue-efforts-are.html
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