The NYT had a mostly good piece discussing the gap in competitiveness between the northern and southern European countries that lays at the heart of the debt crisis in the euro zone. One item that would have been worth adding is the fact that European Central Bank is making any potential adjustment process far more difficult by not having more expansionary policies and by refusing to act as a lender of last resort.

Forcing heavily indebted countries to meet tough deficit targets, at the same time that their interest burdens are soaring, is creating an impossible situation. This is leading to a downward spiral in which austerity measures slow growth and raise deficits, which undermines confidence in the debt. This pushes up interest rates, which makes the deficits even larger.

Comments (2)

Subscribe to this comment's feed

Show/hide comments

(Only one link allowed per comment)

Show/hide comment form

Powered by Azrul's Jom Comment for Joomla!