Sunday, December 26, 2010

What's next in the Eurozone financial crisis

Los Angeles Times
December 25, 2010

For a year now, the once-mighty euro has lurched from crisis to crisis as debt-ridden Greece and then Ireland were forced to ask their neighbors to bail them out of financial trouble.

The fear now is that fellow Eurozone members Portugal, Spain and Italy, which also have large budget deficits, will follow suit. Borrowing costs for these countries have skyrocketed even as they scramble to pass harsh austerity plans to convince investors of their commitment to cutting public spending.

But is too much austerity also a recipe for disaster, strangling demand and stifling growth? Can Germany, Europe's export powerhouse, continue to run up big trade surpluses with other Eurozone nations while refusing to stimulate consumption at home to help out its struggling neighbors?

Simon Tilford, chief economist for the Center for European Reform in London, spoke to The Times about the euro's ongoing difficulties.


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