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Macroeconomics  |  September 04, 2012 13:45:29

How Europe could escape the economic Armageddon

More and more economists predict the current composition of the euro area in early end. European authorities have long-term difficulties in finding a cure for the crisis and the question whether it is possible for the European governments to "heal" monetary union is not in academia clear answer. Path to rediscover stability in Europe and will be significantly bumpy (mainly due to political neschůdnosti) possible ways to maintain the cohesion of Europe, however, exist.

ECB prints euros and buying up bonds troubled countries

Economists agree that the most effective curative cure for the eurozone would allow the ECB to buy up government bonds of troubled countries and to erase their debts by printing money. Despite the fact that Germany and other creditor countries to such plans indicate rising prices of European stocks and bonds that investors in this crisis are betting procedure.

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Way but will not block a healthier core resistance - to change the powers of the ECB would have to be revised European laws, which can be a very lengthy political process.

Spain asks for bailout

Massive capital infusion along with the solidarity of other members of the euro zone and international lenders could inflict on the question of Spain more harm than good. It is not certain whether he could rescue from outside hand to revive the moribund banking sector, to remove massive government debt, reduce high unemployment and prevent capital flight. Think of what happened in Greece.

Approximately 7% interest, which must of Spain to pay its debts, is a warning signal. This may not be the final nail in the coffin, which was for Greece, Ireland and Portugal.

As Megan Greene wrote in The Guardian, "there is no magic number above which would be borrowing costs for state already unsustainable." Theoretically, the country could survive if implemented radical fiscal reform to get more money to pay off the debt.

Yield 10-year government bonds of Spain

Spain is not in the same position as the other rescued States because he has not imminent, that it received the cash. Maturity of bonds in Spain rather long, so debt is not increased once for the current high rate.If the government has been able to promote budget cuts without major social unrest, the country still retains the markets where she will provide funding for the way out of the crisis.

If you will keep the markets in Spain, allows the pressure on Italy, which will allow it to continue to borrow with interest Bearable. Over time, markets will recognize that the largest European economies are not as financially vulnerable as a smaller group of PIIGS states that no rescue packages would not work, and stop contagion spreading.

What other options to Europe in crisis can be found on the web Investment

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