Two problems

Shake out.

One of the shake-outs from the big EU meeting last week was to delineate the TWO problems, only on of which has been addressed.

1 Deficits. Without a doubt many EU countries have unacceptable and unsustainable deficits. These cannot be cured overnight, and as far as I know the meeting did not define a timescale for them to be fixed. Personally I think 20 years might be a good frame to think about.

2 Debt. Many big nations have huge debts, including the USA, and all of the EU. The problems of debt is borrowing, and the problem of borrowing is that lenders demand an interest on their money. And for many EU countries this interest is getting too large, as lenders are beginning to believe that debts may not be repaid and default could happen. In other words a country is in sovereign debt where its whole wealth is not enough to pay its debts, and it is continuously running up more by overspending.

Debt comes about only when lenders agree to lend to borrowers, both create the debt, both are responsible, this means the banks. Today EU banks carry too much debt, by lending to countries who increasingly can't pay. The question is how to get enough money to pay off the debts, as the countries cannot generate enough to do it, considering the interest that the loans demand. In the USA the FED simply prints more money, in UK the Bank of England (why not the Bank of UK?) gives money to banks called quantitive easing. But in the EU there is no bank to do this, the ECB charter does not allow it to do it as there is no central financial management.

So the question remains.

We have proposals to have a treaty to coordinate every countries budgets, to solve the first problem - expect for UK which walked away from the table. But for the second - where will the money come from that is urgently needed NOW - there is no solution.