A `New Europe’ Plan to Save the Euro

November 28th, 2011 at 11:01 am David Frum | 11 Comments |

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Polish foreign minister Radek Sikorski will deliver an outline of a plan to save the euro currency in a speech today in Berlin.

Poland, remember, has not yet joined the Euro, and has escaped the crisis that has engulfed other Central European countries whose memberships have already taken effect. (The effect on the Baltic republics was especially devastating.)

The speech will be characteristically eloquent–and the bold ideas it presents will be sooner or later be recognized as inescapable. Let’s hope it’s sooner, and not only for Europe’s sake.

A euro rescue would provide a welcome jolt to US recovery. A Euro crackup will knock the US economy back into a second slump.

Watch this space for more details.

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11 Comments so far ↓

  • ottovbvs

    Err…it wasn’t Euro membership that lies at the root of the Baltic Republic’s economic problems.

    • Cyberax

      It definitely is one of the problems. Baltic countries have been pegging their currencies to euro for 7 years now.

      So they automatically lose ability to conduct independent monetary policy. During this crisis they were forced into savage austerity and lost nearly 25% of their GDP. And they are not going to recover for at least 5 more years even with robust growth.

      Poland, on the other hand, has its own currency and weathered the crisis fairly well.

  • Secessionist

    Why do I get the feeling that any “euro rescue plan” will involve, at the end of the day, a very substantial transfer of wealth from American tax payers to European banks or an intermediary like the IMF?

    On a slightly related note concerning “rescues” in general, this article hit Bloomberg this morning and made my blood boil (my emphasis).

    [blockquote]The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.

    The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

    Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse. [/blockquote]

    More here:

    http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html

    - DSP / Southern Populist

    • ZombieTory

      1) IMF support is always in the form of loans and it’s already being sent to Greece. IMF money will inevitably be needed, but if a restructuring of the Euro zone stems the tide it will hopefully be less of a burden in the long run. The IMF is a lender of last resort, not a charity (that’s the World Bank).

      2) What would happen if the government announced that your bank had serious liquidity issues? Would you withdraw all your savings? I would, so would everbody else. It’s called a bank run and it’s how modern economies collapse. Publishing that specific data while the crisis was ongoing would have been an egregious breach of everything we’ve learned about managing financial crises in the past 80 years.

      • ottovbvs

        “It’s called a bank run and it’s how modern economies collapse.”

        In DSP’s (and it must be said many others) naive and simplistic theories of governance there exists no place for subterfuge.

    • Frumplestiltskin

      oh for Gods sake, everyone knew, it wasn’t a closely guarded secret. There was a crisis of confidence in the entire sector, the point was to get banks to loan to each other, everyone…and I mean everyone was Forced to take a bailout, even the banks that didn’t want it as a way to keep the market liquid. What was kept secret were the negotiations behind closed doors between the Fed and the top banks, but this is the cost of doing business, otherwise the banks would not have signed on.

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