How to sort out the Eurozone debt!
In my view the only way out the debt crisis in the Eurozone is to deepen the monitary union by taking the following long and short term measures.
For the long term - the steps to improve Eurozone debt are :-
1. All Eurozone countries national budgets must be approved as valid fiscal packages by the European Parliament. A valid fiscal package must either:-
- reduce national debt level to 70% of the countries GDP within the next 10 years, if the current debt level is above the 70% level, OR
- keep the national debt level below 70% of the countries GDP, if the current debt level is already below the 70% level
2. All Eurozone countries should only borrow money from or lend money to the European Central Bank, and not borrow from or lend to other countries, the international money markets or the International Monetary Fund (IMF). The borrowing and lending rates for each Eurozone country should be the same.
3. On behalf of Eurozone countries the European Central Bank could borrow money from or lend money to other countries, the international money markets or the International Monetary Fund (IMF).
For the short term - the steps to improve Eurozone debt are :-
1. Set up the long terms rules.
2. All Eurozone countries should set national budgets that are valid fiscal packages and approved of by the European Parliament.
3. Those Eurozone countries with debt levels greater than 100% of the countries GDP must swap real world assets for debt with those Eurozone countries they owe money to, such that the their debt is reduced to 100% of the countries GDP. World real assets equal publicly owned land, infrastructure or companies.
The effects - of both short and long term measures are :-
1. The countries with the high debt to GDP ratios would have lower interests rates on that debt, because the bulk of the Eurozone debt is French and German. France and Germany they have a better debt to GDP ratio but a far greater GDP levels and therefore a larger ammount of debt in cash terms.
2. The world markets could not pick off one country at a time because they would only have access to ECB Eurobonds, not Greek, Italian or German bonds. This is because the ECB would have taken on all Eurozone countries debt and issued ECB Eurobonds to cover it all.
3. In the long term it would make the Euro a very stable currency, as all countries in it would have to be fiscally responsible.
Conclusion - I believe these measures should help the Greeks and Italians pay their debts in the short term. And in the long term help all Eurozone countries become stronger.
In times of financial crisis it is essential that Europeans work together to solve the problem. In this global trading world no country can stand alone and we must help our neighbours first.