24/06/10

George Soros speech at Humboldt University


Para reflexão.

(Peço desculpa por não traduzir, mas não há tempo para isso.)

So what should Germany do? It needs to recognize three guiding principles.

First, the current crisis is more a banking crisis than a fiscal one. The continental European banking system has not been properly cleansed after the crash of 2008. Bad assets have not been marked-to-market but are being held to maturity. When markets started to doubt the creditworthiness of sovereign debt it was really the solvency of the banking system that was brought into question because the banks were loaded with the bonds of the weaker countries and these are now selling below par. The banks have difficulties in obtaining short-term financing. The interbank market and the commercial paper market have dried up and banks have turned to the ECB both for short-term financing and for depositing their excess cash. They are in no position to buy government bonds. That is the main reason why risk premiums on government bonds have widened, setting up a vicious circle. (...)

Second, a tightening of fiscal policy must be offset by a loosening of monetary policy. Specifically, the ECB could buy treasury bills directly from Spain significantly reducing its financing cost below the punitive rate charged by the German inspired European Financial Stabilization Fund. But that is not possible without a change of heart by Germany.

Third, this is the time to put idle resources to work by investing in education and infrastructure. For instance, Europe needs a better gas pipeline system and the connection between Spain and France is one of the bottlenecks. The European Investment Bank ought to be able to find other investment opportunities as well.

Integral aqui.

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