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| Source: Wall Street Journal; Getty Images |
Hellenic Republic suffered a run on its banks, closing them on June 29. Payments froze as well as the economic scheme was paralyzed. Greek banks reopened on July twenty amongst the assistance of the European Central Bank. But many restrictions, including those on cash withdrawals as well as international coin transfers, remain. The crash inward the Greek stock marketplace when it reopened Aug. 3 reminds us that Greece’s economic scheme as well as fiscal organization are even as well as hence inward awful shape.
Greece’s banking crisis revealed the master copy structural work of the eurozone: H5N1 currency spousal human relationship must isolate banks from sovereign debt. To produce this cardinal structural problem, Europe must opened upwards its nation-based banking system, recognize that sovereign debt is risky as well as halt letting countries purpose national banks to fund national deficits.
If Detroit, Puerto Rico or fifty-fifty Illinois defaults on its debts, in that location is no run on the banks. Why? Because nobody dreams that defaulting US states or cities must secede from the dollar zone as well as invent a novel currency. Also, US set down as well as metropolis governments cannot forcefulness set down or local banks to lend them money, as well as cannot select manage of or redenominate deposits. Americans tin easily position coin inward federally chartered, nationally diversified banks that are immune from set down as well as local authorities defaults.
Depositors inward the eurozone don’t percentage this privilege....For the rest, y'all bring to larn to WSJ, Hoover (ungated) or await thirty days until I'm allowed to postal service it here.
Lucrezia Reichlin as well as Luis Garicano bring an fantabulous Project Syndicate piece on the same topic.
Writing contest: This is our showtime paragraph. The Journal's editors idea it was improve amongst latest tidings first. Which industrial plant better?
