Tuesday, 26 April 2011

Euro, Debt and Banks - no reason for more 'coordination'

The well-meaning proposals to avoid a break-up of the Eurozone quite often lead to the recommendation to give more power to a Federal Government that will have more power than the Governments of the individual member states. This is nothing but propaganda by the centralists of all persuasions - be they in the bureaucracies in Brussels, in the Media, Finance or Academia. The main problem at present is the linkage of the bad debt problem in the banking system with the overindebtedness of certain member states. This leads to the (false) conclusion that only by bailing out these states and setting up measures that avoid any state getting into trouble again in the future it will be possible to keep the Eurozone intact. But this means barking up the wrong tree. Policies should primarily focus on safeguarding the banking system. When that has been achieved it is perfectly practical to let individual member states declare bankruptcy and leave it to their politicians to sort out their problems.

No comments: