Regular readers of the Washington Post know that they have a hard time getting information at the newspaper, buried as it is in the center of the national's capital. Robert Samuelson gave more evidence of this problem in his column today on the renewed difficulties facing Spain.
Samuelson told readers:
"in truth, no one has a neat solution to end Europe’s financial nightmare."
Actually, many of us have proposed what would seem like a pretty neat solution, have the European Central Bank guarantee Spain's debt. That would immediately push the interest rates paid by the Spanish government down to the levels paid by the German government. That would make Spain's debt burden easily sustainable.
Spain does need to re-establish its competitiveness which can best be done within the euro zone by having a somewhat higher rate of inflation in Germany and other core countries. If Spain can sustain a lower rate of inflation than the core countries then it will be able to get its current account deficit with other euro zone nations back to a reasonably level.
Samuelson should know that many prominent economists have advocated this sort of solution. He may think it is a bad option for some reason, but then he should present the reason. As it stands, his column makes it sound as though he has no clue on the nature of the debate over euro zone policy.
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