Europe’s day of reckoning cannot be delayed forever

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Europe’s day of reckoning cannot be delayed forever

For the briefest of moments the news of European Union plans to bail out eurozone members that could not meet their debt obligations brought a sense of calm to the market.

The announcement a few days later that the Bank of Spain was taking over Spanish savings bank CajaSur put an end to that.

Banks are still failing, entire countries appear to be on the brink. The problem remains the vast amount of debt, whether in the public or private sector, that hangs over Europe’s economies.

However, every measure taken to find a solution involves at best passing the parcel of debt from one sector or entity to another or, worse, the addition of new debt.

At some point this has to stop. The question is simply how bad the fallout will be when it does. One banker told Euromoney this month: "It’s not inconceivable that there’s a solution that does not involve catastrophe." He has reason to be cautious in his optimism.

The bailout proposed by the EU is more of the same: more debt, up to €440 billion, to be issued if Greece, Spain or other eurozone states can’t fund or roll over their debt themselves.

It would be good to look at the detail of how this debt will be raised, and when, but such information is scarce.

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