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High Noon at the EU corral. An economic plan for Europe, September 2011

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  • Colignatus, Thomas

Abstract

The 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33476.

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Date of creation: 17 Sep 2011
Date of revision: 19 May 2010
Handle: RePEc:pra:mprapa:33476

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Keywords: Economic stability; monetary policy; monetary crisis; credit crunch; zombie banks; euro; European Central Bank; fiscal policy; tax; external balance;

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References

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  1. Colignatus, Thomas, 2008. "A note on competing economic theories on the 2007-2008+ financial crisis: The case for (hidden) stagflation," MPRA Paper 10831, University Library of Munich, Germany.
  2. Colignatus, Thomas, 2011. "The crisis and the raison d’être and prospect for the UK office for budget responsibility versus an economic supreme Court," MPRA Paper 27873, University Library of Munich, Germany, revised 19 May 2010.
  3. Thomas Colignatus, 2005. "A better way to account for fiat money at the Central Bank," General Economics and Teaching 0512014, EconWPA.
  4. Colignatus, Thomas, 2009. "The Tinbergen & Hueting Approach in the Economics of Ecological Survival," MPRA Paper 13899, University Library of Munich, Germany, revised 09 Mar 2009.
  5. Colignatus, Thomas, 2009. "Consumer durables as investments that can help us out of the current economic crisis," MPRA Paper 13382, University Library of Munich, Germany.
  6. Colignatus, Thomas, 2009. "The macro-economics of repressed stagflation. Part 2: The crisis of 2009+ and a reduction of the working week," MPRA Paper 14180, University Library of Munich, Germany.
  7. Colignatus, Thomas, 2009. "A win-win measure out of the crisis: A graphical discussion of the tax void," MPRA Paper 14812, University Library of Munich, Germany.
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Cited by:
  1. Colignatus, Thomas, 2013. "Money as gold versus money as water," MPRA Paper 45759, University Library of Munich, Germany, revised 02 Apr 2013.

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