Legal tip 778. Spain problems have a simple root
04 June 2012 @ 08:57
A simple and overall understanding of what is happening in Spain by Paul de Grauwe
"Thus, the Eurosystem bears a large part of responsibility in allowing bubbles in national housing markets and the associated increases in private debt to develop. These unsustainable developments ultimately forced the governments to step in. In doing so, they saved the ﬁnancial system and prevented the economy from being pulled down in a deﬂationary dynamics. Reforms of the governance in the Eurozone should therefore not only focus on the responsibilities of national governments (and these are serious) but also on those of the European monetary authorities, and in particular those of the ECB.
To summarise: the creation of the Eurozone in 1999 was a big step forwards in the process of European integration. But it was unﬁnished business. No steps were undertaken to embed the monetary union into a political union. This had the effect, ﬁrst, of leaving the Eurozone without instruments to prevent economic divergences in the Eurozone from developing. Second, it left the Eurozone without an insurance mechanism that could have been used to prevent contagion from leading to a systemic crisis"
"Valdevaqueros", Tarifa, Cadiz, Spain, at flickr.com
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