Sunday, April 28, 2013

Europe’s debt overhang: It is costly being in denial for too long

''An unprepared Europe has taken an inordinately long time in dealing with the debt, as a currency without a state is a contradiction. But despite many 'unthinkable' remedies being adopted, Europe has to be more coherent and aggressive in tackling the eurozone crisis because time is running out, writes Loukas Tsoukalis.
Loukas Tsoukalis is Professor at the University of Athens and President of the Hellenic Foundation for European and Foreign Policy (ELIAMEP) and a member of the World Economic Forum’s Global Agenda Council on Europe.
Europe has taken an inordinately long time in dealing with the debt overhang after the bursting of the biggest bubble since 1929, and the resulting cost is very big indeed.
The reasons are many and complex: a highly decentralized decision making system having great difficulties in coping with a big crisis that criss-crosses national borders, growing economic divergence between member countries accompanied with a rise in populism within and a loss of trust between them, and the enormous difficulty in reaching an agreement on how to distribute pain in the adjustment to a post-bubble world among debtors, bank stakeholders and taxpayers, and even more so between countries. Who pays the bill?..''

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