High Noon at the EU corral. An economic plan for Europe, September 2011
AbstractThe 2007+ credit crunch and economic crisis put European governments in severe debt, with talk about a Greek partial default. It also put the European banks into a zombie condition, while under Basel III the capital requirement rises from 8% to 10.5% (which requirement does not cover public debt since that is considered reliable). Fiscal measures concern tax structures and that Germany and Holland eliminate their surplusses on the external account. A monetary measure is that the European Central Bank as lender of last resort helps to prevent a crisis of confidence. The ECB can create capital and neutralise this by higher reserve requirements. Two reasonable measures are: (1) EUR 400 billion of European Recovery Capital (ERC) will reduce Greek and Italian debt to 100% of their GDP (using 2010 data). Greece and Italy on their part can have a wealth tax or create 40 year leases (implictly at 10 billion per year excluding interest) like Hong Kong once was for investment areas under foreign law (think of Magna Graecia). (2) EUR 400 billion can be injected in eurozone equity (and not eurozone bonds) in banks to allow the increase from the 8% to the 10.5% target. This equity can be managed by newly created independent ERC Investment Banks (ERBs), where the shares are allocated to eurozone member states in proportion to their GDP. This partial nationalisation would reduce eurozone national debts by 4.3% of GDP.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 33476.
Date of creation: 17 Sep 2011
Date of revision: 19 May 2010
Economic stability; monetary policy; monetary crisis; credit crunch; zombie banks; euro; European Central Bank; fiscal policy; tax; external balance;
Find related papers by JEL classification:
- E00 - Macroeconomics and Monetary Economics - - General - - - General
- A10 - General Economics and Teaching - - General Economics - - - General
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
- NEP-EEC-2011-09-22 (European Economics)
- NEP-MAC-2011-09-22 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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