The INET Council on the Euro Zone Crisis

The report recognizes that there has been little overlap between what is economically and financially necessary to repair the flaws in the euro zone system and what is politically feasible in an environment that has degenerated into distrust among nations within the system. It is in that context that the ICEC has recommended the following:

1. This dramatic situation is the result of a euro zone system that is thoroughly broken. This systemic failure exacerbated a boom in capital flows and credit, and complicated its aftermath after the boom turned to bust.

2. It is the responsibility of all European nations that were parties to the euro’s flawed design, construction, and implementation to contribute to a solution.

3. Absent a collective effort the euro zone will disintegrate quickly. The stresses have been building for a long time and conditions in several countries are not socially or politically sustainable much longer.

4. In formulating recommendations, the ICEC report makes a clear distinction between the legacy problems that were created by the dysfunctional design of the euro zone over the past 10 years and the challenges of re-design that would restore the soundness of the Euro zone system.

5. One cannot deal with the legacy overhangs as long there is no clear commitment to long-term re-design.

6. At the same time it is impossible to build long-term mechanisms such as a banking union as long as the legacy overhang of debt imbalances debt, competitiveness, and capital inadequacy of financial institutions impede the path toward a healthy Europe.

via economistsview.typepad.com