Euro’s Affordable Salvation, in Five Steps: Laurence Kotlikoff
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Oct. 12 (Bloomberg) -- German Chancellor Angela Merkel andFrench President Nicolas Sarkozy are in a terrible bind. Theydon’t want financially distressed European governments todefault. But they can’t afford to keep them solvent.
Collectively, the governments in question -- Greece,Ireland, Portugal, Spain and Italy -- owe more than 3 trillioneuros ($4.1 trillion), much of it short term, and are stillborrowing at a rapid clip. The market isn’t buying their fiscalpledges or their risky paper, forcing the European FinancialStability Facility and the European Central Bank to step in. Butthe EFSF has its limits, and the ECB doesn’t want to keep buyingindefinitely.