Tuesday, March 3, 2009

EU has solutions in case of euro state default

Oh, really?

Hard to see what that could be unless they have ammended the Maastricht Treaty to give the ECB the ability to bail out failing institutions. At present it is precluded from doing that. And while that might help prevent bank runs, it certainly doesn't address collapsing economic output and rising unemployment, at least not directly.

The collapse in demand can only be countered by massive fiscal stimulus and as the nations of the Eurozone no longer have the ability to spend by simply crediting bank accounts without limit, some new, integrated regulatory scheme, like that which is being discussed, will hardly be sufficient.

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