Wednesday, January 12, 2011

A Brilliant Solution

Debt-ridden European countries have come up with a brilliant solution to their problems after being shut out of international bond markets: they leaned on their domestic banks to buy their paper. So now they are in a box: if they attempt to restructure their debt, they may bring down their own banks. Postponing the day of reckoning may well result in a worse disaster for their own people than if they had simply defaulted in the first place.