economics

March 16, 2010

A Europe Bailout Fund Gains Backing Brussels Confirms Plans for IMF-Style Body Are in the Works, in a Sign Greece Turmoil Is Spurring Political Integration

Filed under: Uncategorized — ktetaichinh @ 12:03 am
Tags: , ,

But in a sign that the idea won’t enjoy smooth sailing, Germany’s Jürgen Stark, a member of the European Central Bank’s executive committee, said in an article to be published Tuesday in Germany’s Handelsblatt newspaper that such a fund would send the “wrong incentives” and would likely result in costly financial transfers across the 16 nations using the euro.

One proposal to address the “moral hazard” risk comes from economists Daniel Gros of the Centre for European Policy Research in Brussels and Thomas Mayer of Deutsche Bank.

They argue a European monetary fund should have powers to organize an “orderly insolvency” of a country unable to pay its debts, creating a bankruptcy procedure for national governments in which creditors would be forced to take losses.

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