Editorial Team: “Armadebton” and “Debtocalypse” are terms Jon Stewart has used to describe the US debt crisis. European commentators have not yet coined a name for their continent’s debt troubles as eurozone pessimism reaches new depths. Share your thoughts on the on-going sovereign debt crisis.
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Sylvester Eijffinger and Edin Mujagic: The euro is currently dividing the euro zone more than uniting it. The “One size fits all” policy increased tensions both internally with inflation and externally as a rebuffed currency. The 10 year-old euro is far from holding its promises.
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Soyen Park: The financial crisis will bring about critical changes to the global order. New markets will emerge, the ECB may disappear, and leading financial institutions may become obsolete. Whatever the case, prudent, coordinated government policy is imperative.
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The European Union must concretely answer the question of whether member states are jointly responsible for each other’s debts. ++ ‘Kissinger-style’ ambiguity is useful in diplomacy, but dangerous in the market. ++ Politicians must understand that market forces will always test ambiguous economic policies. ++ Fannie Mae and Freddie Mac were backed by similar ambiguous policy in the
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Unlike the US, the EU is not a federal union and therefore cannot afford to bail out one of its members. ++ Comming to the aid of individual members of the currency union is simply forbidden. ++ The ongoing debate about the possible Greek bail out plan is not relevant. ++ From the starting point, the eurozone was neither economically efficient for all members nor sustainable in the long run when
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The global financial crisis has had severe repercussions in the new Eastern European EU-member states, as well as in the three former Soviet Republics of Belorussia, Ukraine, and Moldavia. The following lessons can be drawn from the manner in which the crisis impacted these Eastern European countries:
If a currency peg is to be used in this region, then it should be in the dominant currency in
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The European Central Bank has cooperated with major central banks to expand its liquidity provision, making it easier to access central-bank money. ++ Fundamental measures to protect economies have been carried out by euro-zone governments, which have “provided support for the banking system by offering funds for recapitalization and guarantees for inter-bank loans.” ++ Effective
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Germans now lament eschewing the “glorious era” of state ownership of banks. ++ They are missing a cardinal fact, though: The European Central Bank’s independence “enabled it to serve as a corrective to governmental policies and powers,” whereas the US Federal Reserve implemented “interest rate and money supply strategies configured to meet the needs of the US
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Even those inimical to US policies “have reason not to gloat over America’s comeuppance.” ++ Hugo Chavez has warned of the impending force of “one hundred hurricanes” about to be unleashed on the world’s markets. ++ European nations are having a hard time coming to terms with a solution; Sarkozy has promulgated an EU-wide bailout fund for all 27 members, which faced ardent opposition from
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Historically, reformers have always tried to stabilize activity through control of interest rates and money supply, but these are not consistently correlated. ++ The current crisis was foreseeable; booms cannot be eternal. ++ The world’s central bankers should first save the system. ++ Many want to raise the expansion rate as soon as possible, but the US election may make stabilization
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The downturn of economic activity in the Eurozone has come as a surprise. ++ The twin shock of the exchange rate of the euro and oil prices squeezed profits from exporting firms. ++ The opposite has happened in the US, where the export sector is booming. ++ The European Central Bank allowed this to happen by only caring about price stability and allowing massive euro appreciation. ++ The ECB
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