The issue debt crisis still dominated in politics and the media

For two years, the issue debt crisis dominated in politics and the media. It has been discussed, criticized and judged but it gradually is changed. It is time to draw a balance sheet once. What has been achieved in recent years? After two years, between apocalyptic fantasies, the subject debt crisis is no longer criticized so much in the media.

The strategy of the European governments concerning the handling of the euro crisis is widely criticized but often it is with unfounded arguments or comparisons. It raises a question. What policy the past eurozone-debt-crisis-atwo years, which be assessed?

In early 2010 it was decided to Greece, which is known for its fragile banking system. This was an attempt to gain time, both for the various deficit countries, and in regards to the banks. It was successful in that there are substantial liquidity problems again in the financial markets. These are different problems as in Italy and Spain, and solvency problems, as in Greece. Greece remains a special case, and its reorganization will require 15 to 20 years. Of course, not only the administrative apparatus must be completely redesigned.

Likewise, is for adjustment processes, it comes to the reduction of wages and prices, because they require a national consensus between the political and the social partners. The fate of the leaders in the deficit countries, and the social changes is to countries to continue on the path of excessive debt. The key for further policy development and design knowledge from the market reaction, it is a creditor participation.

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The same goes and for institutional development with the New Fiscal Deal. One side rated the bailout policy of the past two years as a failure of the European idea. Perhaps such a statement will find its supporters. Of course, things should not be considered biased, and they must be adopted in its full entirety.

On the other hand, this process can also be understood as an opportunity. Because of the situation, developments and reforms, which have been initiated. Otherwise, they might never have come about. Even if no one can tell, whether the measures lead to success.

The monetary policy and therapy

The loose monetary policy of the ECB take effect and the financial markets are calmed. It is also, the interest on government bonds to fall, because the industry gets cheap loans for investments and the depreciation of the euro booming exports. Everything will be clear in the end. The European Central Bank (ECB) has stabilized at its recent sharp easing of lending requirements for commercial banks and European financial markets.

Combined with the efforts to enhance the European fiscal discipline seems Europe – led by German Chancellor Angela Merkel – on the right path out of the crisis. Europe can be stabilized in five directions. First, the improved funding conditions will calm the European financial markets. This is especially regards the ECB exchange securities with poorer credit ratings for fresh liquidity.

Second, is expected stabilize the interest burden of governments. The bond purchases of European countries by the ECB will prevent crisis in the south of the euro zone sovereign defaults. Third, in the industry with the help of cheap credit will can to invest more. Fourth, by euro depreciation, export growth is animated. Fifth, here it comes to political instability.

For the long term, the cost of money rain under the Italian Central Bank President Draghi will be visible. Because the interest rate converges to zero for a long time – what is emerging in Japan since 1999, now come also in the U.S. and the euro area. Then the allocation function of the interest rate will be abolished. Monetary expansion of the European Central lined is the warning signal rising dollarrisk premiums on government bonds. So that the constraint is lost in regards to debt reduction.

Plans for structural reforms /for example, in Greece, Portugal and Italy/ are shelved. Keep current account imbalances. Structural distortions, which are a result from excesses in real estate, stock and financial markets are not cleaned up, but they are cemented.

The oversized and unbridled financial sector will continue to inflate. The profit opportunities for speculators remain high and striking income inequality continue to grow. In short, the monetary policy of therapy today is the cause of speculation and uncontrolled public debt crises, stagnation, social injustice and political instability in the future.

ESM undermined the stability

The numerous measures of euro rescuers to date are showed only side effects. Liability is softened by EFSF and ESM. The principles of Maastricht are systematically undermined. Moreover, therein lies the problem of anti-crisis measures. Whether it be about Fiscal Pact, EFSF, “Big Bertha”, or ESM, the euro bailout policy is shallow and ineffective.

In addition, it is delayed from the crisis. The basic principles of the Maastricht Treaty, which should keep the euro stable, modelled on the German mark, are reversed. The ban on state funding by the ECB is undermined; monetary stability is threatened by the extreme expansion of money. This is similar to the policy of Italy, Greece, Spain and Co. has acted for decades in pre-Euro-times and is exactly the opposite of what has been promised to the German taxpayers on the euro adoption. Thus, the euro cannot be saved. The systematic violations have damaged confidence in the euro countries.

Only if the trust can be restored, the debt crisis can be overcome. The Fiscal Pact was an attempt to restore confidence but it has failed. In an emergency, it is just as soft as the Maastricht Treaty. The sanctions are not going far enough in that they are credible. That is the only sanction that really helps. EFSF and the ESM are not particularly help to the stability rules.

The EFSF may not result in rescue without limit. For this country may even to be necessary to a temporary exit from the euro zone. To keep costs to taxpayers as low as possible, the cost could be removed by future profits. Monetary and fiscal policy must be strictly separated again.

The correct approach is to return to more responsibility and ownership. Of course, it is possible to look at this problem from another angle. In the course of the euro crisis, the Germans were finished as considerable amounts of their money emigrated to the States debt, while well-off Greeks tried their utmost to provide their assets abroad – out of reach of the public sector.

This has understandably led to a lot of trouble and falsely stupid prejudices. The truth is that Greece receives massive support from the German side. Nevertheless, the complexities of the euro area require a more thorough approach. Topping the list of possible destination ports for Greek savings is Switzerland.

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