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Roubini and ferguson: the eu bailout approach is a disaster by wwy yrj
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Roubini and ferguson: the eu bailout approach is a disaster by WWY YRJ
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| Article Posted: 01/03/2013 |
| Article Views: 34 |
| Articles Written: 1412 - MORE ARTICLES FROM THIS AUTHOR |
| Word Count: 394 |
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Roubini and ferguson: the eu bailout approach is a disaster |
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Business,Business News,Business Opportunities
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In an op-ed published on the Financial Times website Friday on the eve of the announcement of the Spanish bailout,economist Nouriel Roubini and historian Niall Ferguson wrote that the current approach to bailouts in the eurozone, whichat the moment appears to be the way things are playing out inSpain, makes matters way worse. Here are their thoughts: The way out of this crisis seems clear. First, there needs to be aprogramme of direct recapitalisation – via preferrednonvoting shares – of eurozone banks, in the peripheryand the core, by the European Financial Stability Facility and itssuccessor, the European Stability Mechanism. The current approach of recapitalising the banks by the sovereignsborrowing from domestic bond markets – and/or the EFSF– has been a disaster in Ireland and Greece: it has led to asurge of public debt and made the sovereign even more insolventwhile making banks more risky as an increasing amount of the debtis in their hands. Europe also needs to prevent a run on it's banks: Second, to avoid a run on eurozone banks – a certainty in thecase of a Greek exit and likely in any case – an EU-widesystem of deposit insurance needs to be created.
The other major item missing from Europe's plan to clean up theeuro mess, according to Roubini and Ferguson, is a change of stancefrom Germany and the core on moving closer to fiscal union in theform of eurobonds or some other mechanism. On fiscal union, Roubini and Ferguson suggest that the EuropeanRedemption Fund might be the way to go at this point: Finally, given the unsustainably high public debts and borrowingcosts of certain member states, we see no alternative to some kindof debt mutualisation. There are currently a number of different proposals for eurozonebonds. Among them, the German Council of Economic Advisers"proposal for a European redemption fund is to be preferred –not because it is optimal but because it is the only one that canassuage German concerns about taking on too much credit risk.
Read the whole op-ed at FT.com . SEE ALSO: This Is A Fantastic Presentation On Why 'Germany Is Riskier ThanYou Think'. I am a professional writer from Food & Beverage, which contains a great deal of information about cholesterol lowering diets , coconut cake recipe, welcome to visit!
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