Charles Wyplosz, 20 June 2012

The EZ rescue strategy adopted in May 2010 failed to restore debt sustainability, avoid contagion, or reduce moral hazard. This column argues that a volte face is needed. The debt of Greece, Portugal and Italy – and perhaps Ireland, Spain and France as well – must be restructured to restore growth and end the crisis. All EZ nations should pay since their leaders’ decision to violate the Maastricht Treaty’s no-bail out clause is what brought us here.

Daniel Gros, 05 December 2010

Muddling through isn’t working. This column argues that troubled Eurozone nations should simultaneously open restructuring talks while continuing to service their debts normally. Germany, France, and other core Eurozone nations would have to stand ready to recapitalise the banks most exposed to the restructured debt. The ECB would then stabilise the banking system and the EFSF would stabilise sovereign debt. This big bang could be prepared in a weekend; the market already seems to be pricing it in.

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