Saturday, December 3, 2011

EU Debt Crisis

Europe's debt crisis has been an ongoing saga for over a year and still shows no signs of ending. Things are so bad that even signs of action by European leaders are a cause for celebration among investors.

The latest signs by European leaders hoping to end Europe's debt crisis was a call from German Chancellor Angela Merkel who wish to push for stronger rules against overspending by European countries. In theory, this is good. Overspending by European countries like Greece, Ireland etc was what caused the debt crisis so new, stronger rules against overspending is sound.

However, it is also not what Europe needs.

Europe don’t really need new rules on overspending, it already has them. What Europe needs are rules to punish countries who break the rules! Currently Europe don’t have these rules and this is what Europe need at the moment. More importantly, the EU needs an agency to enforce these rules and punish countries who break them.

Greece, Ireland, Spain, Italy all overspend and…nothing! Germany has to bail them out and by then, it’s too late. The damage had already been done. As it stands right now, there is nothing to stop EU countries from committing the same mistakes in 10-15 years time.

So forget new rules against overspending; what the EU needs is an agency to enforce these rules!

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