The Global Future of Europe’s Crisis


English: Long-term interest rate statistics fo...

English: Long-term interest rate statistics for EU Member States. (percentages per annum; period averages; secondary market yields of government bonds with maturities of close to ten years) – Source: http://www.ecb.int/stats/money/long/html/index.en.html
(Photo credit: Wikipedia)

By Kemal Derviş – It is now clear that the eurozone crisis will continue well into 2012. The ECB’s generous provision of liquidity to European banks at only 1% interest for up to three years has prevented a banking crisis from piling on top of the sovereign-debt crisis. But that initiative has not succeeded in reducing the “problem” countries’ longer-term borrowing costs to levels compatible with their projected growth rates.

Beyond the specific problems of the monetary union, there is also a global dimension to Europe’s challenges – the tension, emphasized by authors such as Dani Rodrik, and Jean Michel Severino and Olivier Ray, between national democratic politics and globalization. Trade, communication, and financial linkages have created a degree of interdependence among national economies, which, together with heightened vulnerability to financial-market swings, has restricted national policymakers’ freedom of action everywhere.

Around the world, the stock of financial assets has become so large, relative to national income flows, that financial-market movements can overwhelm most countries. Even the largest economies are vulnerable, particularly if they are highly dependent on debt finance. more> http://is.gd/cHymfk

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