VOX
December 1, 2010
The Irish bailout failed to stem contagion in the Eurozone. This column argues that the root cause was the separation of monetary policy (ECB) and fiscal policy (member states). If European authorities are unwilling to suspend this separation, the contagion will spread.
The illusions evaporated last weekend. No one believes that fixing Ireland can prevent the “infection” from reaching Portugal and Spain. No one has convincing answers on how to stop the contagion. Uncertainty is paralysing markets and accelerating the crisis’s spread.
Before designing new policies to stop the contagion, it is necessary to review the deep fundamentals that explain the Eurozone’s situation. Each country has its problems which are somewhat different from those of its neighbours. But behind this second fall of the euro lie two common problems. The first and most fundamental is the separation between fiscal and monetary policy.
More
No comments:
Post a Comment