European bank move could help economy

European bank move could help economy

Press quote (Voice of America)
07 September 2012
The chief economist at the CER, Simon Tilford, says if the stronger countries don't agree to share that pain, the troubled countries may force them to, by withdrawing from the euro and defaulting on much of their debt.

"This is an argument about money, basically," said Simon Tilford of the CER. "Who pays for misallocated capital, profligate borrowers or irresponsible lenders? The only way of addressing this kind of problem is by both sides taking a hit. And so far the full burden of adjustment is being imposed on the debtors. If they continue with this strategy, then ultimately the only way out will be through countries quitting the currency union."

Tilford says the European Central Bank's decision could be a significant step toward solving the crisis, but only if Germany doesn’t block it, and only if the bond buying program is big enough and lasts long enough. And he says European leaders need to find a way to enable the weak economies to grow, so they can repay their debts and ease the burden on their people.