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How to Deal with the Sovereign Debt Crises in the E.U.

It is time for E.U. to take more concrete and proactive steps in dealing with their public debt.

Recently there has been much talk about EuroBonds to help stabilize the E.U. markets ( as well as the global markets .) I believe that in order to keep the E.U. intact, they will EVENTUALLY decide to issue EuroBonds, if the E.U. and the Euro are to survive; without kicking out any of its under preforming members. This goal of eventually issuing EuroBonds is a process that will take some time and great political will. Unfortunately, the E.U. is not currently ready and prepared to take such a large ( but necessary ) step. The concept of having a single currency, without fiscal union is proving to be moving from ‘misguided’ at best; to likely ‘disastrous’.

The solution lies in gradually developing stronger, more powerful as well as just MORE … institutions; within the framework of the E.U. This would include mainly political and structural institutions. The E.U. must establish more clout over the Eurozone. This will take some time. The largest problems from this E.U. fiscal nightmare are from: 1. nationalism, 2. individual culture and history of each country, as well as 3. national politics in each E.U. member country.

As existing E.U. institutions and strengthened and more structural institutions are developed and strengthened to address these 3 before mentioned issues, only then will we see the possibility of greater fiscal union and the idea of EuroBonds put back on the table. This could take a while, but for the sake of the survival of the E.U. and the Euro currency; it may be one of the only options for survival.

Amended 8/18/11  , 6:50 pm EST … Another option for the E.U. is to ‘kick out’ one or more of the following countries from the Euro Zone: Greece, Ireland and Portugal. This would provide more maneuvering for the E.U. to handle it’s public debt problems. Everything has consequences however.  This option would allow the E.U. more room to maneuver, but it may possibly inspire less confidence in the Euro and the E.U. in the short term.

We will see what happens.


About Neven's Blog

My blog focuses on FINANCIAL MARKET ANALYSIS & INSIGHT from a macro as well as a micro - level point of view. The information is straight forward, honest, simplifies complex matters, questions some oversimplified matters, all while being as easy as possible for readers to understand. I primarily focus on capital and currency markets by combining insights, analysis & ideas from the fields of finance, economics and geopolitics.


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