PARIS – Is there a way that the countries of southern Europe can avoid sinking further into debt at unsustainable interest rates, without resorting to euro bonds, which Germany refuses to consider?
Former IMF director Dominique Strauss-Kahn has an idea that he presented this past weekend at the YES (Yalta European Strategy) Forum which was held recently on the Black Sea coast.
Strauss-Kahn explained to the distinguished gathering that since the beginning of the euro zone crisis, the debt of the sturdiest economies, like Germany and France, has become more and more sought after. Investors’ “flight to quality” is leaving the most fragile countries deeper in debt and paying higher and higher interest rates.
“If we continue like this, the system will collapse,” said DSK. He suggests that the countries with higher ratings, like Germany, “put back into the pot part of their interest rate spread” to help countries like Spain or Italy.
Euro bonds, which would be issued in the name of all euro zone countries, would allow the same thing, “but the Germans refuse to consider them because they do not want to take on the debt. Therefore, we must find another solution, and act on the flow of funds,” Strauss-Kahn argues.
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