Sometimes the glaringly obvious needs to be said.
Euro leaders have now conceded that Greece will, almost inevitably, default on its debt obligations.
There is only one solution to this problem as far as I can see: the Eurozone as a whole will have to accept responsibility for the currency that it created and replace the failed Greek debt with new Europe wide debt obligations that would be issued in exchange for the discredited Greek debt at an obvious, and considerable, discount on the latter.
Of course this is a default, but what it does do is provide a clear, valuable, and secure financial instrument to replace a failed one. Banks can value them, and therefore balance sheets can be restored to good health. The cost of the replacement debt should be spread over many years, maybe 50 in all. There is a demand for such debt. If issued on a Europe wide basis the interest rate will be low, and affordable. And the fact is that Greece can still be required to make payment of the resulting obligation, but through a central European agency making this a political issue, rather than a 'state to bank' issue.
The solution seems to me to be glaringly obvious. Why isn't it on the table?
(Assume this was the back of a fag packet: is this such a solution? - sometimes they're the best).
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Absolutely.
My best guess is that this has been the hopeful game plan all along by those in control of the ECB (basically Germany and France). They want a ‘super crisis’ to create enough fear in the eurozone to then force a proper, tighter fiscal union onto the eurozone which under normal circumstances would be politically impossible. The background to this is always about politics.
New World Order here we come, in other words. Let it come down, I say. Damn the banks, damn the bankers. We do it to them to stop them doing it any more to us. Bring in the Schumacher era, with local currencies eveywhere. What you’re talking about is a kind of recovery and the last thing we want is to recover to where we all work for the banks again because we have to use their money which is only made available at crippling interest rates. We need to put all that behind us, not simply ameliorate the effects of their antisocial regime.
BB
I could be wrong here (no surprise there) but wasn’t the eurozone supposed to act something like Keynes proposed ‘bancor’ scheme? That is, the big states were required to help out the smaller, more impoverished states?
I may have imagined it, but I’m sure I read something like that somewhere.
Never officially
Unfortunately
And Germany is blocking it
This is as much a German crisis in that way as a Greek one
The glaringly obvious reason why Euro bonds have not been on the table so far is that common funding of EU debt implies fiscal transfers from stronger to weaker economies, which are ruled out under the existing Stability and Growth pact. The dominant members of the EU are only too happy to ignore key parts of this Pact when it suits them – for example, both France and Germany ran deficits well in excess of the 3% GDP limit for years – but they are not so keen on changing the rules to benefit smaller, weaker countries.
As of yesterday, Euro bonds are back on the table. Now that wouldn’t have anything to do with the fact that France is significantly exposed to Italian debt and Germany can’t possibly bail out Italy on its own, would it?