Barry Eichengreen, economist and professor of Economics and Political Science at the University California, Berkeley, Eichengreen is considered a leading expert on the history and functioning of international financial and monetary system.
He gave an interview to AP/Agencia Estado. he believes that although the European Union (EU) and the IMF have created a package of 750B to try to prevent a contagion of Greece's fiscal problems on other countries of the region and protect the euro, the European bloc has a very long road ahead. A road where a new plunge into recession appears inevitable.
He says: "Governments have not taken measures for fiscal consolidation and the EU did not adopt the bailout package until it was too late,"
"Now we reached a point where a slowing European economy is almost inevitable greater," "This story is not over. The package is still in progress. The European Parliament has to agree and to have access to money, countries will have to negotiate a program with the IMF, which they do not want to do. The important part was not the package, but the decision of the European Central Bank to buy bonds from Greece, Spain, Portugal and Ireland. This allowed the debt market to calm down and took the time to governments"
On Spain and Portugal and announcing fiscal measures: "There is still uncertainty about what the Parliaments of Spain and Portugal will do. There will still be an economic slowdown and recession in Europe in countries further south. But the volatility is over".
Will the Euro collapse? He adds that the euro was punished by the crisis, but is still better than any alternative.
On possible fragmentation of Europe: "Recent years have taught us that anything is possible. But I think that fragmentation is unlikely. A Greek default is more likely. Restructure debt is not the same as abandoning the euro and reintroducing the drachma (Greek currency). The problems of Greece will not be solved if the country leaving the euro zone. The country must restructure its debt.
When the ECB may start increasing interest rates?
Interest rates: "The interest rates will not rise anytime soon".
Recession: "It's too late to avoid a double recession. Governments have not taken measures necessary for fiscal consolidation, the EU did adopt his bailout package until it was too late and now we reached a point where a slowdown is almost inevitable.
How long then to Europe to recover? "Depends on reforms, but we're talking years".
Is the U.S. safe? "The indicators show that the recovery is accelerating, and Europe will not help in this process. The worst thing that could happen would be Europe and China slowing down at the same time. Let's hope China continues doing well".
Saturday, May 15, 2010
Eichengreen: Bailout Package Came Too Late: Europe To Go Into Recession
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