Daily Archives: April 16, 2010

From Martin Wolf’s Exchange

One of the most interesting set of questions to arise out of the Greek crisis in the eurozone is whether – and, if so, what – institutional changes are needed to make it easier to manage disarray of this kind.

Some would argue that there is really no problem. When countries within the eurozone get into difficulty, they are supposed to look after themselves. The European Central Bank should continue to look at the performance of the economy as a whole. Meanwhile, given the “no bail-out” provisions of the treaty, each country must be on its own. If a country cannot raise the money it needs to finance its government, it has no choice but to raise taxes, cut spending and, in extremis, restructure its debt. The latter is likely to mean a deep recession, not least because the private sector is likely to be badly affected by a sovereign default. This would be particularly true for the financial sector. Read more

An open letter from Laurence Kotlikoff of Boston University to Lord Turner, chairman of Britain’s Financial Services Authority

Dear Adair,

I listened to your terrific talk at the Soros conference. I could focus on the eloquence, fantastic delivery and numerous deep insights, but let me make a couple of comments that may be of actual value at the margin.  Take them from where they emanate – real friendship and respect.

It seems that you are questioning yourself. On the one hand, you are saying it’s critical to consider radical solutions. On the other hand, you are saying, “Too radical, too fast, is too dangerous. If we move to real safely, we may need to take decades.” Read more