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Back to ¿Una señal a los mercados?
José Luis Álvarez, Director of department of Economics, University of Navarra
A signal to the markets?
Is entrance private banking feasible for the Greek bailout?
Yes, it could be a partial write-off of the Greek sovereign debt, at least partly borne by private creditors (not only banks, but also other institutional investors). If done well, in an orderly and clear manner, it would send a strong signal to the markets that would lend credibility to the monetary union, while encouraging prudent behavior.
How will the bailout affect Spain?
The core topic will be in the formula to be applied. If timid solutions are adopted, in the hope that the mere passage of time will fix some of the problems, we will once again experience a deterioration of the status of the countries most threatened by investor distrust, including Spain. On the contrary, if the solution demonstrates decisiveness and commitment, including the assumption of the inevitable bailout costs, the markets will understand that the Monetary Union is politically sound enough to ward off uncertainty. In this sense, the bailout needs to be accompanied by institutional reforms, such as greater integration in fiscal policy, to eliminate the structural weaknesses detected by the markets.
What could happen if Greece is not bailed out?
Greece cannot meet its commitments. Its position is currently unsustainable, so it needs a bailout, a solution that is convincing to investors. If this bailout is not given, Greece will default, unleashing a wave of distrust and uncertainty in the markets, not only about the status in the peripheral countries, but also about the future of the Monetary Union itself. If there is a lack of political will to help Greece, this crisis could engulf the entire Euro project .