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>The problem is the perception of a problem and that leads to higher bond yields and that is what leads to this real problem. No, there is a real problem, whic
by tsotha 15y ago
>The problem is the perception of a problem and that leads to higher bond yields and that is what leads to this real problem.
No, there is a real problem, which is the eurozone is a monetary union without a fiscal union. It's fundamentally unstable, something that can only work in good economic times. One of two things is going to have to happen to align fiscal and monetary boundaries - either national currencies will be reintroduced or fiscal policy will have to be aligned for the entire eurozone.
- linuxhansl 15y agoHow exactly is this causing the problem? The problem is the cost of financing debt. That cost is high because the risk of the investment is (perceived) high.
- tsotha 15y ago>That cost is high because the risk of the investment is (perceived) high. Eh, that's semantics. The risk is high. None of these countries can afford the slightest rise in interest rates, whether that rise is associated with a loss of confidence or because there are better places to put money. That's what the Maastricht treaty was supposed to prevent. But that was a pipe dream because there's no way for the union to keep the spendthrifts in line.