After the finance crisis of 2008 experts keep speculating on whether the single European currency will survive or will have to be eliminated. Most of them suggest that the euro will hold. Russian economic and political expert Vladislav Inozemtsev proposes a fresh and efficient model of actions for Western Europe.
- What means would be the most efficient for the EU to combat the severe effects of this economic crisis?
-This is more of a financial than actual economic crisis. The problem is to issue credits once again to those EU member-countries that are no longer trusted financially — first of all, Greece, Portugal, Ireland and Spain. I think it is impossible to convince all EU members to make «donations» once again. The idea of Euro-bonds or of a joint Euro-fund is thus inefficiant. I would propose another course of action: The EU should issue a new loan as a unified party. The sum of this loan would constitute some one billion Euros and the interest rate would be 3% per year — the market would accept it gladly, as the borrower is extremely creditable. Then the European Commission would issue bonds of problem countries at a 5-6% profit rate. This would solve the issue of additional allocations to these countries. For the next 8-10 years the European Commission would collect interest from the borrowers and pay its bond-holders.
Therefore, by the end of this period, all debts would be paid. The European Commission could pose the surrender of budgetary independence of the problem countries as a condition. The major advantage of my scenario is that Europe wouldn't press its governments for money, but would earn it on the market. I see no other efficient means of resolving the situation. Right now, the problem is not debt itself, but the enormous rates of interest.
-Could the additional boosting of Euro-based economies cause hyper-inflation?
-In the above-mentioned scenario — no. There will be no excessive banknote issuing.
-How would this development affect Russia?
-There shouldn't be any negative consequences. It could even boost our oil profits, and it would save European industry — one of Russian raw materials consumers. And finally, high Euro rates would make European goods less appealing on Russian market, which is good for Russian producers.
Interview by Igor Rappoport, exclusively to VK
