Today both the IMF and OECD, conservative global agencies charged with tracking data and offering advice on the global economy, gave clear advice to Europe: Issue Eurobonds, backed by the credit of all Euro countries (esp. Germany), to replace the individual soveriegn debts of weaker countries. They said this is the only way to avoid risks of dangerous defaults by the latter.
Germany replied “No Way.” I don’t really blame Germany; after visiting last month, I can see how much the Germans feel they have already paid to rescue East Germany from its decades of communist-imposed poverty and decline. Asked now to rescue other countries from their self-imposed poverty and decline, their response is, understandably, “No, go bail yourself out or fix your own problems.”
Sadly, that is just not possible. The fix we are in is that Germany and Greece and Spain and Italy are democracies. The voters in the first will not spend their money to fix problems in the latter; voters in the latter cannot swallow the devastating austerity that Germany is asking them to swallow (and which won’t do anything to rescue their economies without broader European and global growth anyway).
So it looks like we will slide toward default and worse, with every country in denial, rather than gain an orderly exit of weaker countries from the Euro and an adjustment of their economic balances. I fear the next crisis is just around the corner (again…)