The Eurobond scheme only works effectively if taxation and spending powers are transferred to a central authority – “fiscal union”. But bar a series of truly extraordinary backflips by Europe’s divided rulers, spontaneously agreeing to settle their deep differences, this will not happen. Should anything resembling a “Eurobond” eventually be summoned up, it is liable only to be a feeble stop-gap measure. The underlying causes of Europe’s financial crisis will not have been addressed.”

Very good analysis by senior economist James Meadway on the New Economics Foundation blog.

Here is Meadway’s solution:

The first steps to ending the crisis are to end austerity, halting and reversing the suicidal programmes of expenditures that have been launched; to write off debts that are now unpayable, whether owed by states (like Greece) or individuals and firms (as in Spain); and to allow the failure of private banks, nationalising and recapitalising them as needed. Tight restrictions on the movement of capital will be necessary to prevent financial panic spreading, and serious, radical efforts must be made to reverse the growing concentrations of wealth in Europe. For countries in the south, most especially Greece, this will not be achievable without abandoning the euro.”

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