What can Save Euro from the Threat of Debt?

With the advent of financial crisis that has brought economic uncertainties to almost all states, it is undisputed that the strength of investors would become feeble and the valor of leaders might get twisted. This is apparent with the current status of the deteriorating value of Euro in the global market whereas the European leaders are critically brainstorming for the immediate resolution of the monetary problem.

euro debt crisis

Euro Debt

It is not a sign of obliviousness, though, to ask on how this matter is being taken by the concerned agencies, especially those who are directly part of the government’s financial system. This is purely a technical matter, but the right to be informed with the matter that might affect one’s business or regular living should not be deprived to any active citizen. Thus, such may have been the prime reason why, in the preceding week, President Mario Draghi hopefully expressed that he will do whatever it takes to regain the strong dominance of Euro in the market.

As a matter of fact, the attention of international markets has been diverted into such issue, specifically, to the European Central Bank which is the instrument of the direct act of the government. Nonetheless, the statement of the president served as a signal for the investors to declare intervention to resolve the economic crisis early before the legislators take their summer break.

Nevertheless, what is even more interesting is that after the press conference was held regarding the resolution, the expectations of private entities and the investors boosted up, and such is undeniably a great challenge for the bank authorities to meet, otherwise, there would really be a deluge of disappointments and frustrations in the market. Be as it may, but the following are few of the possible options which the bank could possibly take for the outright resolution thereof:

  • Bond Purchases – the European Central Bank might resort to maximize its market program for securities that could permit the bank to purchase government bonds. And since it has previously bought billions of bonds from other states, the economists believe that by doing so again, there would have bigger chance to make an effect on foreign bond markets and, thus, making the costs for loaning decrease.
  • Quantitative Easing – this is always opposed by Germany, but the bank could potentially utilize some effective model to identify how many bonds in every Eurozone member it would purchase. Specifically, this easing would involve buying bonds throughout the region with newly acquired money.
  • Banking License – the bank could also grant banking license for the permanent bailout fund of the region and, thus, allowing the European Stability Mechanism to loan from the central bank and resort to amicable solution like what other states do. Nonetheless, this would not gain acceptance from German legislators.
  • Lower Interest Rates – currently, the bank has not yet initiated to further boil down its interest rates, but there is still possibility that it might do such in due time.
  • Combination of Measures – the bank, certainly, is not bound to only one option, and could choose a combination of measures such as, for instance, bond purchasing and further provision on liquidity.

As for the time being, there is still no apparent and specific means to neutralize the effect of the crisis and restore the stability of Euro in the global market. What is just certain for now is the query on what or who could really save Euro from the threat of debt?

Comments

  1. Ivan says:

    The global economic crises is really eating deep into so many societies and the strength of major currencies facing hard times to stand firm. Times are changing, and budget keeps rising. I think investments and bond should do a fair work in helping the euro.

  2. Casey says:

    I really see the situation in Europe and the U.S. as a repeat of the same mistake leading up to the Great Depression. The governments are simply not providing enough stimulus as only governments can when things get this illiquid. Everyone is so damn afraid of inflation that they won’t budge and are trying to beat this global recession with austerity, a technique that has had little success in the past. I understand their concerns about hyper-inflation, but we are nowhere near that situation. People hate the idea of “printing money” but I’m afraid that’s what’s needed at this point. If everyone sees their assets increasing in “value” even though the currency is devaluing, they will be a lot happier and spending more money I can assure you.

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