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Tag Archives: European Stability Mechanism

So, now we know what the latest euro-crisis summit has to offer. The fifth comprehensive effort to stabilize to eurozone in nineteen months, this latest Brussels gab-fest produced a slew of headlines and initiatives. But what did it really achieve? The single currency remains just as incoherent as it was last weekend, just as vulnerable to systemic collapse. The region’s banks and governments are still very highly indebted. Eurozone leaders are deluded if they think some diplomatic sticking plaster, and a lot of bluster, can hold together an inherently unstable structure.

What’s more, to use a combination of borrowed and printed money to bail-out cash-strapped governments, which are insolvent largely because they, in turn, are standing behind insolvent banks, is to treat the symptoms of the crisis, not the cause. This historic policy error – tackling the results of the problem rather than the problem itself – has characterized the West’s response to this sub-prime fiasco from the very beginning, not just in the eurozone but the UK and US too. Europe’s predicament is so much worse, though, given the restrictions imposed by the single-currency straitjacket.
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