Tuesday, October 12, 2010

Getting the eurozone out of its troubles

Last month, the Economist had a nice article about the challenges facing the EU's euro zone. They did a good job of reviewing Greece's problems and discussing the problems of the other countries that may follow that country into trouble (Ireland and Spain, most prominently). They also pointed out that fiscal centralization is not as promising a recipe as some commentators believe.

Their main call is for more spending by trade surplus countries. They point out that higher inflation (and quantitative easing) might be a good idea, but that this would be anathema to the European Central Bank (ECB).

Conveniently, this last point was just confirmed by a member of the ECB's Governing Council in a talk at the Yale Law School. So more spending by Germany, Austria, and the Netherlands appears to be the best hope for now.

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