Daily Telegraph: “Europe’s arse over tit approach to imminent default”


From Jeremy Warner, assistant editor of The Daily TelegraphWill Portugal be the straw that breaks the euro camel’s back? (Rather less a robust title than that within the web address…):

The trouble with the European approach to the problem is that it is all the wrong way round. When a business becomes insolvent, you don’t generally lend it even more money. Rather, you seek to restructure the debts so that the business stands a fighting chance of becoming a going concern once more. Banks imperilled by the write-offs are then recapitalised. But that’s not what’s happening in Europe. Instead, the core is in effect lending the periphery even more money in the hope that by so doing they protect their banking systems from further damage. What they ought to be doing is organisating an orderly restructuring and recapitalising their banks to match. But actually, and to the understandable and growing dismay of their electorates, they are doing the reverse…

It has been obvious for more than a year now that at least three of the eurozone peripheral nations will at some stage default. Yet denial remains the order of the day. Rather than preparing the ground for an ordered restructuring, and recapitalising national banking systems to match, European policy makers are still flaffing around with the idea of national bailouts. Not only does this approach the problem from the wrong end of the telescope, but it seems increasingly unacceptable to the electorates of the countries having to provide the funds. Voters seem to realise better than their political leaders that it is only chucking good money after bad.

Read more.

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This entry was posted in Bankers' Bailout, Debt Default/Restructuring, ECB/IMF, Economy, EU, ireland, Solutions and tagged , , , , . Bookmark the permalink.

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