Monday, May 17, 2010

Finally the Europe wakes up

Finally after much reluctance and debate, the Europeans came out with a fund of nearly 1 trillion dollars to fund heavily indebted European countries. Although I proposed this one before with a more modest 250 Billion Euro fund but this fund money has also to be borrowed somehow. It did temporary calms the market (for like three days) but it did not camouflage the fact that the debts of the poor European countries can be pushed aside by giving them more debt which will essentially go back to the creditors and the Greeks won’t see much of the money anyway.

The basic thing that the markets are seeing is too much debt and not enough market and structural reforms. Even if you put more money into these countries, if they don’t have the means to raise their income, it will be just more debt. It is now time for Europe to figure out how to reform their job and business market because they can’t be rich always and their liabilities are increasing more than their income and this can’t continue in the long run.

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