Gloom, Boom & Doom report publisher Marc Faber says the time has come to boot euro members who repeatedly violate the region's budget rules, even though no mechanism for such a step yet exists.
"The best would be to kick out Greece and the countries that abuse the system," Faber says. "They didn't have the fiscal discipline that was essentially imposed by EU," he told Bloomberg.
Europe’s worsening debt crisis — which began six months ago with falsified Greek budget data — is intensifying pressure on officials to extend bailout help to other European countries as cuts in countries’ credit ratings continue to drive up borrowing costs.
As the turbulence exposes the weakness of having a currency area without a single fiscal authority, some economists believe that policy akers need to create a lending mechanism that will help other euro areas members through fiscal crises.
European leaders will gather Friday for another try at calming panicky markets skeptical of their pronouncements that the crisis won't spread to other countries, the Associated Press reported.
A summit of the 16 leaders from countries using the euro — initially called to sign off on a 110 billion euro ($140.36 billion) bailout package for Greece and draw lessons for the future — faces the challenge of urgent crisis management, after the euro dropped to its lowest level in 14 months and bond markets dumped Greek debt.
EU leaders have insisted for days that the Greek financial implosion was a unique combination of bad management, free spending and statistical cheating that doesn't apply to any other euro zone nation, such as troubled Spain or Portugal. They said the bailout should contain the problem by giving Greece three years of support and preventing a default when it has to pay 8.5 billion euros in bonds coming due May 19.
Yet, the markets have taken little heed. Stocks, Greek bonds and the euro plunged even after the head of the European Central Bank, Jean-Claude Trichet, underlined that "Portugal is not Greece. Spain is not Greece" on Thursday.
“What is missing in Europe is an authority that can back sovereigns through a crisis,” says James Nixon, co-chief European economist at Societe Generale SA, told Bloomberg.
“We desperately need this.”
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