Europe debating how to restart economy, revive struggling euro
With the new year, the quiet that has enveloped the eurozone crisis is starting to break. There's rising worry about how to get the economy restarted, whether Greece will carry through with its promised cuts and whether the E.U. can keep the crisis contained.
Europe's leaders are at odds again, this time over the best way to get the economy growing again.
Germans officials and economists insist that reduced spending and balanced budgets are the only way to put the economy on a sustained growth path.
" 'We must quickly achieve a structurally balanced budget,' Mr. Weidmann said in an interview with the Tagesspiegel newspaper. Germany should set an example for the rest of the beleaguered euro zone," he said according to The New York Times.
Many outside of Europe and even some within are bothered by that approach and say if it does bring the economies around, it'll be years before it achieves success. On Monday, German Chancellor Angela Merkel and French President Nicholas Sarkozy warned Greece that it must follow through on its promises and reduce spending further, key conditions to the next wave of bailout funds being released by the EU.
Lucas Papademos, Greece's technocrat prime minister, warned last week that without further cuts, his country could be looking at default and the withdrawal from the eurozone, either voluntarily or by force.
According to Reuters, part of the problem for Greece is that the banks and investment companies that are expected to write-down the value of Greek debt by some 50 percent are so far dragging their feet in negotiations. The European Union is also struggling to generate the 200 million euros that it wants to pass to the IMF, for use in bolstering economies struggling with high debt loads.
The United Kingdom's participation is believed to be key to meeting the objective. So far, U.K. officials have been uninterested.
As the prospect of continued crisis continues, the borrowing costs between the wealthiest, safest nations — Germany, Switzerland and The Netherlands — and the weakest nations — Italy, Spain, Greece — continues to widen. For the first time ever, according to Reuters, Germany sold bonds at a negative interest rate recently. Italy and Spain, on the other hand, are poised to offer bonds later this month and may have to pay more than 7 percent interest.
That's a level many view to be unsustainable.
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