Saturday, February 6, 2010

The Euro Crisis

From the Times:

A policy of muddling through may be comfortable in political terms, but experts warn it can have dire economic consequences. Jean-Paul Fitoussi, professor of economics at the Institute of Political Studies in Paris, said that European leaders had “handled this crisis very badly,” feeding market speculation and greed.
Jacques Mistral, an economist at the French Institute for International Relations, said that the main actors now were Jean-Claude Trichet, president of the European Central Bank, and the leaders and finance ministers of Germany and France.
“That’s the troika, and they’re leading the process to explore different ways and compromises,” Mr. Mistral said. “When there is a will there is a path.”

1 comment:

Euro Crisis said...

Euro Crisis
There is a big difference between a liquidity problem and a solvency problem. When a company or a country has enough assets to cover its liabilities but they have a problem raising the money they need to pay off the loan they have a liquidity problem. But when an entity has more debt than it can serve than it has a solvency problem and in that case more debt and loans will only dig it into a bigger hole. Greece has a liquidity problem since it has much more debt than the economy can serve. Germany and the Euro are perhaps will to give them loan in attractive interest rates but unless they are willing to consistently transfer money from the core of Europe to the weak countries those countries are doomed.
If German politicians think they can convince there citizens to fund Greece's recklessness throw transfer payments all I have to say to them is GOOD LUCK!