Tags: Economists | Time | Euro

Economists: Time Running Short for the Euro

Monday, 14 Nov 2011 08:55 AM

Time is running out for policymakers to isolate and eradicate the debt crisis in southern Europe and save the euro, economists say.

As long as the debt crisis continues, borrowing costs will keep on rising and crimp financial systems even in comparatively healthy countries like France.

Despite changes in government in problem countries like Greece and Italy, the economy should grow 0.5 percent next year at best, according to the European Commission, a hair above recession levels, which has some worried that time is running out.

"I think we’re in very dangerous territory, and the euro zone has to act soon," says Simon Tilford, chief economist for the Center for European Reform in London, according to the New York Times.

"There isn't really a muddle-through option right now. And those who argue that it's possible for the south and Italy to default or deflate into competitiveness are fanciful and flying in the face of evidence."

Damage, Tilford adds, will be severe "to their economies, debt burdens, social and political stability, democratic accountability, and their belief in their European allies and in the European Union itself."

Investors in government bonds are demanding more fiscal austerity, especially in the developed world.

"Fiscal austerity winds are blowing," says Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, according to Reuters.

While austerity measures often curb spending, they also cut into growth in the process.

"This is going to act to slow down growth," Chandler adds.

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Time is running out for policymakers to isolate and eradicate the debt crisis in southern Europe and save the euro, economists say. As long as the debt crisis continues, borrowing costs will keep on rising and crimp financial systems even in comparatively healthy countries...
Economists,Time,Euro
247
2011-55-14
Monday, 14 Nov 2011 08:55 AM
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