The debt crisis which Europe is suffering from is now almost two years old. It has spread misery across the entire continent. Doubts are being raised about the future of the Euro. These doubts have shaken up investors and threatened growth on a global level.
The investors have jacked up interest rates on Italian, Greek and Spanish debt to very high levels and have raised the risk of bailout plans not working too well. Unemployment has gone up in Europe to alarming levels. European leaders need to look at five policies to get the European Union back on track.
- Tackle the debt problems – The budget limits have to be set for the Euro zone countries. Power should be handed to a centralized Euro zone budget authority to demand change in the individual spending and taxing plans. They have to use the bailout funds to buy government bonds on the open market and help countries like Spain and Italy to sell bonds to finance their deficits.
- Overhaul the banks – The European commission can establish a continent-wide banking union monitored by a centralized regulator. Instead of lending money to Italy, they can deposit directly into the Italian banks and take an ownership in them.
- Help Greece – The coalition government fresh from its election ten days back should make the hard budget cuts that are necessary under the bailout deal. Greek voters have taken Greece almost out of the Euro zone.
- Stimulate the sluggish economy – The French and German leaders have agreed last week to push for growth with a one hundred and sixty billion dollar package.
- Germany to back the rescue plan – It is important that Germany not veto the debt liability proposals on a single handed basis by being wary of getting stuck with the bill for a rescue plan. Time is running out and the crisis is not in the mood for waiting on the countries to take their time on deciding on a rescue plan.