This situation offers a window of opportunity for southern countries to reform. The financial emergency is a force which can help politically with difficult reforms. The possibility that the ECB might slightly relax its monetary stance creates a unique opportunity. The time for action is now.
Thursday, September 1, 2011
Alberto Alesina and Francesco Giavazzi argue that eurobonds ought to be called "a German guarantee on Spanish and Italian debt." Then it becomes easy to understand why the Germans reject the idea. At the same time, they see a silver lining in the recent slowdown of the German economy, because this will make it easier for the ECB to inject more liquidity into the system by continuing its purchases of sovereign debt, which many Germans have opposed.