Tags: European Debt | European Crisis | Angela Merkel | ECB | European Union

Economists: Don't Expect Quick Fix to European Woes

Friday, 16 Dec 2011 08:46 AM

Europe's debt woes will continue to plague global economies and markets in 2012, as there is no quick way to resolve the crisis, economists say.

German Chancellor Angela Merkel has said the crisis "can't be solved in one fell swoop overnight," according to Reuters, adding quick solutions such as creating and selling eurobonds or Central Bank purchases of risky sovereign debt won't work.

Economists agree that market calls for a quick fix via Central Bank intervention, in conflict with Berlin's insistence that austerity and tougher fiscal discipline are the answer, will slow the healing process.

"Bridging the gap between these two distinct views of the crisis — conditionality versus unconditional support — will be a slow, painful and politically fraught process," says Nicholas Spiro, managing director of Spiro Sovereign Strategy, a consulting firm, according to MarketWatch.

Even if policymakers did suddenly agree on a way out of the crisis, it would still take a long time to turn agreements into reality.

"It’s unlikely that treaty changes or the eventual introduction of eurozone bonds can be implemented quickly enough to prevent an escalation of the crisis," John Higgins, market economist at Capital Economics, writes in a research note, MarketWatch adds.

"If we’re right, then any optimism could soon give way to pessimism, putting renewed pressure on eurozone government bonds and more pressure on the euro as investors took fright once again from the prospect of a break-up of EMU."

Policymakers are far from agreement, with Central Bank President Mario Draghi remaining firm that intervention on his behalf via purchasing bonds won't work.

"I will never be tired of saying that the first response ought to emanate from the country," says Draghi, according to the Associated Press. "There is no external savior for a country that doesn't want to save itself."

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Europe's debt woes will continue to plague global economies and markets in 2012, as there is no quick way to resolve the crisis, economists say.German Chancellor Angela Merkel has said the crisis can't be solved in one fell swoop overnight, according to Reuters, adding...
European Debt,European Crisis,Angela Merkel,ECB,European Union
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2011-46-16
Friday, 16 Dec 2011 08:46 AM
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