“The sense of a never-ending 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.
The 17 economists said Europe’s political waters have been muddied by disputes over eurobonds, debt-pooling, subsidies and fiscal union. None of this was necessary to break the logjam, they said.
They claimed the system could be stabilised immediately by creating a lender of last resort to back-stop the bond markets, either by mobilising the ECB or by giving the eurozone bailout fund (ESM) a banking licence to borrow from the ECB.
In a veiled rebuke to hard-line politicians in Germany, the economists said the root cause of the crisis has been the boom-bust effect of rampant capital flows over the past decade – not delinquent behaviour by feckless nations. “The extent to which markets are currently meting out punishment against specific countries may be a poor reflection of national responsibility”, they stated. But they said the current course had become hopeless. Deepening recession is “tearing at the social fabric of the deficit states”.
Full article
Full report
List of authors and advisors
© Institute for New Economic Thinking
© The Telegraph
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article