There is a widespread perception that, apart from three or four delinquents who are causing problems for everyone else, the eurozone is doing well. That is not the case at all. Without exception, every euro-using country is running a budget deficit bigger than the Stability and Growth Pact allows and only five small countries have debt- GDP ratios below the 60% ceiling. As a result, all are planning budget cuts which, because they are being implemented simultaneously, could make matters worse by reducing national incomes at a time when national debts are still going up.
This collective austerity programme will do little or nothing to save the problem countries – Ireland, Greece, Portugal and Spain – from default and the rescue fund set up by the IMF and the ECB will only buy time before they do so. If that time is wasted and radical relief methods are not tried, the defaults will cause French, British and German banks to suffer massive losses and require further state support. However this paper by Richard Douthwaite argues that a limited, targeted injection of non-debt-based euros could provide a neat and swift solution to a debt problem the whole eurozone shares. It was written in November 2010 but remains relevant now as the situation in the Eurozone with regard to austerity measures has not changed much in the interim.
Featured image: 20 euros. Author: jmjvicente. Source: http://www.sxc.hu/photo/966146.
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Richard Douthwaite (6 August 1942 – 14 November 2011) was a co-founder of Feasta. His many projects included the design and introduction of a non-debt currency to run in parallel with the euro and the management of the Carbon Cycles and Sinks Network which explores ways in which land-based greenhouse gas emissions can be reduced. He lived in Westport, Co. Mayo.