Governments are anxious about making drastic decisions that would restructure debt such that the public helps refinance Greece, Ireland and Portugal. This increases the fear that bailout efforts are being diluted. And the European public certainly hopes they don´t have to pay up.
Sources consulted by elEconomista doubt that the European recovery fund and European Central Bank (ECB) will gradually absorb these countries? public debt. But someone has to do it. The government leaders will want to, because someone has to put money back in the markets, and they will like ask their constituents to help. It is as if the government is saying " the bill is on me," but the citizen leaves the check.
Socializing Misery
If time proves this view is correct, get ready to pay at least 1,000 euros per person. Alive is a Europe similar in appearance to old communist regimes. Socializing misery, Winston Churchill would say.
Until this spring it was still believed that bailouts for these three countries would give the EU time to orchestrate a restructure that wouldn´t incite panic in the market and crumble economies like Spain or Italy, which could annihilate the euro and worldwide economic recovery and send those countries? financial systems to a point past recovery.
It was said that the debt restructuring process would begin around the middle of 2013. By then the European banks will have been consolidated and recapitalized. They are already in a position to make up losses caused by devaluation of their shares of Greek, Irish and Portuguese debt. Possibly, the private sector could carry up to half the debt, the public carrying the other half.
Europe will also develop a banking crisis resolution at some point during 2013. This mechanism would facilitate a controlled bankruptcy for banks victimized by the process, which would lessen the amount states would have to contribute to the process and would avoid asking the public to help bail out the financial system yet again.
Edited in English by Brandon Dyches and Jose L. de Haro (for comments contact: joseluisdeharo@eleconomista.es)
