Thursday, September 1, 2011

Silver Linings

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.

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.


FrédéricLN said...

True, but so late. This kind of reforms takes 3-5 years to work. The bankruptcy is in the forthcoming days for Greece, weeks for Portugal and Ireland, see

The bankruptcy will lead to a reform, as has been the case in Argentina.

It would have been much, much better to get a reform without financial bubble, without debt bubble, without bankruptcy. But it's too late.

Anonymous said...

Thanks for that article.

Something off-topic but unbelievable (both meanings)
The nurse who witnessed monetary transactions also seems to have received death threats (no wonder she's changing her testimony)
and she wouldn't be the only one:

Now, I've come to the fragile conclusion a while back that French democracy could resemble Daley democracy, without much proof but just an impression, a sense of "it's possible". Yet this seems both far-fetched and scarily "possible" because there are so many similar stories from different people.
(This post can be not-published if it's too inflammatory)