The financial crisis in Europe, seemingly never-ending, has now entered a potentially disastrous phase. [...] there’s a real possibility that the euro zone might just break apart [...] Yet what’s easy to miss, amid the market tremors and the political brinksmanship, is that this is that rarest of problems—one that you really can solve just by throwing money at it.
To be sure, Italy and Spain have genuine troubles: their economies are weak and their debt loads are high. But these problems are manageable as long as the interest rate on their debt stays reasonably low. (This is in contrast to Greece, which had no hope of ever paying off all its debts.) Italy’s fiscal situation is not good, but it’s not much worse than it was a decade ago. Indeed, it’s one of only a small handful of countries in the developed world that are running a so-called primary surplus [...] The problem, then, isn’t the debt itself but, rather, the soaring interest rates, and these are driven more by fear than by economic fundamentals. [...] fear of default raises interest rates, and higher interest rates make default more likely.
The frustrating thing about all this is that there is a ready-made solution. If the European Central Bank were to commit publicly to backstopping Italian and Spanish debt, by buying as many of their bonds as needed, the worries about default would recede and interest rates would fall. This wouldn’t cure the weakness of the Italian economy or eliminate the hangover from the housing bubble in Spain, but it would avert a Lehman-style meltdown, buy time for economic reforms to work, and let these countries avoid the kind of over-the-top austerity measures that will worsen the debt crisis by killing any prospect of economic growth.
Dienstag, 29. November 2011
"Ein Problem, das man nur lösen kann, wenn man es mit Geld überhäuft"
