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Eurointelligence Syndicated Column: The eurozone needs outside help to prepare for the worst By Leif Pagrotsky (02.03.2012)
Severe instability of the eurozone would hurt everybody, also outside the eurozone. I therefore suggest that non-euro or non-EU European countries and other stakeholders like IMF, Switzerland, Russia and China take the initiative to get this urgent process going by asking the independent and qualified staff of OECD, BIS or EBRD to start working on the scenario of a breakup  urgently. They need to analyse how the pain of a transition can be reduced, in individual countries and in the eurozone as a whole, how the financial system can avoid collapse in such dramatic times, and practical things around printing and issuing new money. They need to collect experiences that can be relevant from Ireland/UK and Czechoslovakia, Yugoslavia and the Soviet Union, where currency areas were reorganised.

We cannot afford the risk of an unlikely but possible chaotic dissolution of the euro taking decision-makers by surprise and thus aggravating an already dramatic situation. Preparations should be made now, and by credible outsiders.

I have respect for the risk that measures to prepare for trouble can become self-fulfilling. But years of avoiding the core, difficult questions have only led to a loss of credibility and a worsening of the crisis. We must now learn that lesson and let others step in, who are independent of prestige and vested interests.




There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Mar 2nd, 2012 at 04:29:40 AM EST
Recall: Time for the Fed to Take Over the European Central Bank's Job by Dean Baker on November 28, 2011
The European Central Bank (ECB) has been working hard to convince the world that it is not competent to act as central bank. One of the main responsibilities of a central bank is to act as the lender of last resort in a crisis. The ECB is insisting that it will not fill this role. It is arguing instead that it would sooner see the eurozone collapse than risk inflation exceeding its 2.0 percent target.

...

Fortunately, the Fed has the tools needed to prevent this sort of meltdown. It can simply take the steps that the ECB has failed to do. First and most importantly it has to guarantee the sovereign debt of eurozone countries. The Fed simply has to commit to keep the interest rate yields on debt from rising above levels where it risks creates a self-perpetuating spiral of higher debt leading to higher interest rates, which in turn raises the deficit and debt.

...

Of course this sort of intervention will look horrible from the standpoint of the eurozone countries. It will appear as though they cannot be trusted to manage their own central bank and deal with their own economic affairs.



There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Mar 2nd, 2012 at 04:31:43 AM EST
[ Parent ]
The current crop of 'leaders' obviously can be trusted to run their own affairs -- straight into the mountain at full throttle.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Mar 2nd, 2012 at 10:04:33 AM EST
[ Parent ]
Eurointelligence - The eurozone needs outside help to prepare for the worst
Leif Pagrotsky is a Labour MP in the Swedish Parliament, Former Minister of Industry and Trade and Vice Chairman of the Council of the Riksbank in Sweden.

And as Minister of Industry and Trade he was one of the most prominent social democrats against Sweden joining the EMU.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Mar 2nd, 2012 at 05:59:39 AM EST
[ Parent ]

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