BAGHDAD – Over the past decade, facilitated one of the largest euro-zone schemes risk at all.  This was done on two levels up to two weeks.

Spain created, Ireland Systems huge bank, and was led to a real estate bubble – but based on the rules of the euro area to ensure that, by implication, commercial banks without sufficient control, and that Portugal, Greece, managing the fiscal deficits, a classic beyond its control, funded bank lending, with all debt that can be used as collateral to borrow short-term (Peru) in the European Central Bank, together with a guarantee (too big to fail) implicit, which became clear at the end of last week.
Italians and is located in the category of less extreme, but also in the line of fire, due to a combination of banking operations and impulsive thinking based on the aspirations with regard to the budget.

And European banks also participated in this policy, the fear, crazy debt securities backed by the government (does not require capital almost) available to be used for short-term loans in the European Central Bank.

And, above all, through the end of this past week pumped leadership euro everything owned (with the consent of the United States, everything is owned by International Monetary Fund) in terms of liquidity, to resolve the problem, and applauded the market in the beginning, but people are now calculating the solvency core.

And Greece is a financial disaster, completely, and under the IMF program, with the new Greece growth soon to get rid of the debt problem of them, will be the ratio of debt to GDP of Greece to 145 at the end of 2011, using the growth figures more realistic example, with low growth 12 per cent at the end of 2011 can reach the ratio of debt to GDP to 155 per cent, and at this level, and with the real interest rate of 5 per cent and the lack of growth, they need to a surplus of considerable initial 8 per cent of GDP to maintain the stability of the ratio of debt to gross domestic product.

And Portugal’s status as bad about the same.

In order to keep its stock of debt and continuous payment of interest on debt at 5 per cent, by the Department of a primary surplus of 5.4 per cent of GDP by 2012.

With a projected primary deficit of 5 per cent of gross domestic product this year, you need to almost 10 per cent of gross domestic product for fiscal tightening.

It is almost impossible to do this system of fixed exchange rate without causing great unemployment. Referred to Ireland as an example of the usefulness of that, but in spite of austerity, even the European Commission optimistic believes that the budget deficit, the Irish would be about 11.7 per cent of GDP in 2010 and 12 per cent in 2011, and unless there is a miracle in global growth, will address shortly door mechanism of the European stability.

In the last week, noted economist William Buiter that Governments have the biggest incentives to defaults when you run a preliminary budget balanced (ie, after the large budget cuts) and still have a large government debt outstanding.

This means the structure of incentives they would postpone a decision to default, which would make sense now otherwise.

Considering the problems of incentives in the euro area, it is not surprising that he wants more countries to join – the requirement that only seem wise for several years, and have the countries that have governments wasteful, or weak financial systems, sources of great wealth.

In general, encourages the system (the race to the bottom), led by governments in smaller countries eased the financial and credit standards to win re-election (or to enjoy a period of prosperity), have borrowed money from the least wasteful in the euro area.

The Germans Mottaghvin, while enjoying less developed countries a period of prosperity, now over a period of prosperity and must be paid one of them in Greece, Portugal, Spain, Ireland, and possibly Italy something – or at least stop its borrowing restrictions.

Do not have external financial support makes sense only if accompanied by reforms to the euro zone incentives. But the action last weekend opened its credit window to the European Central Bank and sent a clear message to creditors that: You can profligate lending to countries again without risk. In fact, undermine the actions of these emergency readiness of any government to address problems relating to the ability to meet its financial obligations, “This could have two ways now, to give euro zone countries on the rule of substantial fiscal policy (such as sovereignty over budget deficits) and the establishment of the organization of strong banking one , or they can be allowed to continue the system that there is (God of destruction) of other global rise to cycles of boom and bust and rescue operations, and in the first scenario will be left behind countries such as Greece at the end of the day, and in the end will bring Europe more debt intertwined – that the (lagging behind the euro area ) in general for payment, either by refusing to pay, or inflation.

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