As an ongoing symptom of the interconnectedness of private finance, public finance, and the lack of infrastructure in the euro zone, the IMF has warned that banks are expected to withdraw 1.2 trillion dollars of credit from the euro zone economy over the next 18 months. That's 10 percent of the EU economy, and even more of the euro zone economy.
The IMF, which views this contraction as the natural consequence of deleveraging (destroying reliance of the financial sector on credit to the same degree as before the crisis started), suggests that the only way to avert an even greater disaster is to accept a milder one--in which banks are closed, merged and restructured across national boundaries to reflect the lower amount of money in the economy.
That, in itself, may make sense. But will national governments in the EU break from their existing pattern of saving national banks to allow such restructuring?
That would indeed be a revolution in thinking, and it's just possible that national governments haven't hit bottom yet. I'm not putting any money it.
The IMF, which views this contraction as the natural consequence of deleveraging (destroying reliance of the financial sector on credit to the same degree as before the crisis started), suggests that the only way to avert an even greater disaster is to accept a milder one--in which banks are closed, merged and restructured across national boundaries to reflect the lower amount of money in the economy.
That, in itself, may make sense. But will national governments in the EU break from their existing pattern of saving national banks to allow such restructuring?
That would indeed be a revolution in thinking, and it's just possible that national governments haven't hit bottom yet. I'm not putting any money it.
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