Daily Archives: April 30, 2012

Even with tough political action, it will take Spain years to achieve a balanced budget – meaning that it will be essential to build private sector investors confidence to finance deficits and avoid a Greek-style default. If there is a big shortfall in private sector financing, funds from the European Stability Mechanism could prove insufficient to fill the gap.
An alternative emergency approach would be to mandate, on a temporary basis, bond purchases by Spanish households and businesses. An alternative emergency approach would be to mandate, on a temporary basis, bond purchases by Spanish households and businesses.

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Europe needs to be more willing and able to support Spanish adjustment efforts. As currently set up, European mechanisms for exceptional financing assistances are overly binary – either way too little assistance or, at the other end, a full blown rescue package that brings with it the risks of collateral damage and unintended consequences. Continue reading »