German Government Try to Fix the Problem Make Matters Worse
By Himfr Paul
Submitted 2012-01-29 20:12:59
Number Of Times Read: 39
Greek rescue just in the past 6 months, in Europe in trouble again. Ireland, the European small country s debt jumped, bond yields rose sharply affected in a similar situation in other countries: November 10, Ireland s ten year government bond yields as high as 9 , 6.2 percentage points out of German bonds.
So the question again: Who should be responsible for this mess? Euro the world s largest economic zone in the common currency in the end how it?
Who is the next Ireland
In the analysis of view, the main culprit of the crisis lies in Ireland. Irish banks and asset markets on risk taking behavior crazy little attention. The greater the real estate bubble blowing, once they see signs of the problem, the Government has mistakenly provided to all bank debt guarantee carpet, and ultimately to the taxpayers to bear the loss, the Irish government had to pay for their own actions: This year s budget deficit reached 32 of the gross domestic product.
Although Ireland caused major problems because of their own, but other euro area can not be optimistic, in aid of Greece, the euro zone countries, performance is not satisfactory, it begs an obvious question that Greece will never be able to repay all debts . On the other hand, the other euro zone countries support the temporary emergency program to develop the same full of defects: in particular, its private creditors too lenient. When Portugal and Spain joined the ranks of Ireland and Greece, the euro system will be close to collapse of the state.
Once the panic spread, various investors are reluctant to hold the euro nominal debt, which for the euro area is undoubtedly the future and the euro itself was a disaster. After Greece and Ireland, Portugal and Spain almost certain to doom and gloom, then backward domino larger economies, such as Italy and so on, which is also Germany, France and other regions leading force in the last line of defense before.
Royal Bank of Canada, analysts said, Who is the next Ireland? In Ireland s political future is still uncertain circumstances, and in view of Portugal s financial situation, investors are worried it may be the next Ireland.
Germany s worse?
Although Ireland has the edge in the crisis rocking, but the German government practice of trying to fix the problem, it seems that confused the situation worse.
In October 2010 the EU summit, German Chancellor Angela Merkel made a proposal: Any future euro rescue package should include a mechanism for orderly sovereign debt bankruptcy. That is, when the sovereign credit problems, the private bond holders to bear the loss. However, for this proposal, the German side has not developed during the summit, more detailed measures.
Merkel s proposal faced a lot of people accused the German chancellor just to get more support from the German taxpayers, so many leading partners in the euro area to gain a foothold situation. Although the German authorities insisted that they undertake with private bond holders the cost of the behavior of more assistance, not just for their consideration.
Back in the Greek crisis, the German chancellor in a few months ago has refused to provide specific assistance to Greece until May, after the market further out of control, was forced to take action.
Centre for European Policy Studies, Daniel Gros, director, said he had heard words of anger against the Berlin are often too numerous to mention. This is the fundamental flaw Merkel in action. She did not foresee was that the market does not like the political system. They will make predictions and forecasts are vague, and not rational. He said.
In Ireland, Greece and Portugal are working to develop aspects of the austerity budget for next year, while market volatility, the Irish troubles to the entire euro zone, even the British had a headache.
Nevertheless, German officials said they handled the crisis in Ireland frustration for the future direction of the Irish government did not inform the other euro zone member countries, the future, need more time to formulate details.
We can not because Germany wanted a strong currency and a balanced budget and criticized it, but as the most powerful countries with the highest degree of credibility, which is itself unconsciously with the deflationary impact of the policy, imposed on other euro zone countries. German people less likely to recognize that the policy of Germany, other European countries being hurt, because the operation mode in accordance with the euro, deflation would enhance Germany s competitiveness on the international market, but will also promote the weaker countries into more deep recession, adding to their debt burden,
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Submitted 2012-01-29 20:12:59
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