© Anthony Makin
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Anthony Makin
Professor of Economics at Griffith University, Australia
Leaders of the Eurozone have said they'll decide in March whether to lift a 500 billion-euro ($672 billion) limit to bailout funding. Germany says there's no need to raise the funding limit. What will they agree on? Will they increase funding limit or not?
I doubt whether Eurozone leaders will raise the limit, nor should they in my opinion. There is a risk that bailouts of this kind serve only to delay the inevitable.
To your mind, what sum of money should be raised so that it would be enough to strengthen the support mechanism of the IMF against the Eurozone debt crisis?
The fiscal arithmetic for public debt sustainability implies that unrealistically large primary budget surpluses are required for countries like Greece to bring public debt down to manageable levels. An alternative option to pumping borrowed international funds into economies experiencing large ongoing budget deficits is to encourage large scale privatisation of their state owned assets, including asset sales to East Asian investors.
Is it reasonable to close the gaps in the EU economy by pumping money into the financial "firewall", thus protecting countries against the risk of contagion, or another measures and another policy should be implemented?
Those euro economies in most difficulty financially may be best served if they quit the euro, restored their pre-euro currencies and allowed them to depreciate massively. This would provide a short term boost to their competitiveness and facilitate economic growth which is now being choked off by adherence to an overvalued exchange rate mechanism unsuited to their economic circumstances.