While this proposal could work long term, it will take ages to negotiate and faces opposition in countries like the one I live in (
). That’s why they insist that the European Financial Stability Facility (EFSF) and the European Central Bank (ECB) would guarantee and eventually recapitalize the banking system. Finland
Sounds easy – but is not. Otherwise, the crisis would be over by now - right?. It’s still about who pays the bill (accumulated losses). Not all countries behind EFSF and ECB are easily going to guarantee everybody else. A joint recapitalization of the entire European banking system is not too popular in countries (like
) that do not have banks with big pile of soon-to-be-rotten debt. Finland
George Soros, one of the 97 people behind the open letter to eurozone leaders, published an essay “A routemapthrough the eurozone minefield” the following day. He does not believe banks will be recapitalized by banks themselves or by national governments. Instead Soros believes that the only sensible path is for ECB to solve all problems. He goes actually further than the joint letter and claims that EFSF is actually not even needed short term.
Again: If it would be so easy, why it is not being done?