Any possible solutions to the European Debt Crisis?

[Kasz216]

Lord Ciansworth said:

Kasz216 said:

Lord Ciansworth said:

Kasz216 said:

It's all a matter of forcing irresponsible countries to cap spending at +10% of revenue or so, while actually enforcing it and having regulators check out all the "budget tricks" countries use to hide how much they're really spending.

While spending caps will be introduced in a new EU treaty next year, the seemingly perpetual recession such severe austerity would cause makes it no less likely that troubled states will be able to acquire credit from the markets at sustainable interest rates.

The European Central Bank being granted the power to operate as a 'lender of last resort' is the best solution on the table. Unfortunately Germany seems to be taking a strong stand against such a move, making it a political improbability.

The ECB already is a lender of last resort.

If you mean being a "Lender of Last Resort" to countries... that's a horrible idea.

All that would ensure is that there would be no incentive to actually cap your deficit spending, since the ECB will be there to bail you out anyway... and then either the countries who are responsible would either eventually get fed up and quit the union, have to impliment austeirty themselves to cover the deficit spending countries or outright Europe collapses.

The ECB as a lender of last resort doesn't solve the euro crisis, it strenghens it and just kicks the can down the road abit.

Outside which, proper caps would prevent them from aquiring such credit.  Since money gained from bonds should not count towards Revenue.

As for "Perpetual recession".  It wouldn't be perpetual, though it would occur until their markets shrink back to their "real" fair market value.

It's the best option out there.

The other two lead to massive collapses that take longer to recover from.

I'm sorry but most of that is nonsense. First off, nobody would suggest making the ECB a lender of last resort for states without imposing fiscal constraints on state's deficits, that's a given. Simply assuming, however, you can implent severe austerity, encourage recession and still expect countries to be able to lend from markets that have no faith in them, largely because a lend erof last resort doesn't exist is, frankly, nuts. Your idea stands up when dealing with states wiith relatively small GDPs to some degree as they their European partners can provide them with credit, however if Italy or Spain needs a bailout, the EU doesn't have the firepower to provide those countries with credit, it would overpower both the ESM and the EFSF combined. In short, they need access to the markets to keep going, but the ability to access the market is growing more and more tentative. With a lender of last resort in place, markets would no longer fear these states defaulting to the same extent and wouild be happier to lend at more sustainable levels.

And yes, simply imposing austerity, has and will lead to long term recession. Simply returning to ""real" fair market value", whatever that is supposed to be, will not improve consumer confidence and drive consumerism, the tool needed to exit recession.

Except, you know.  That's exactly what's being proposed above.

The "Strict Austerity measures" being taken are being taken now is simply to get Italy and Greece within what their fiscal deficits SHOULD be under the agreement they previously agreed to, but skirted through "creative accounting techniques."

Also, considering the ECB gets it's money from the richer nations, and it's authority, how exactly do you expect them to come up with more money then the combined euro partners?

And yeah, austerity will lead to a long term recession... hence why is aid they were headed to at least 5 years of pain.  Which by the way is completely unavoidable at this point.  It's just a matter of whether it's restricted to the periphery or if it impacts europe as a who

le.