Blanchflower Says Another EU Aid Package ‘Inevitable’

Bloomberg | May 18, 2010
By Jeffrey Donovan and Erik Schatzker

Former Bank of England policy maker David G. Blanchflower said another euro-region rescue package “inevitably is going to come” and the euro’s “unstoppable” decline may lead to parity with the U.S. dollar.

In an interview with Bloomberg Television, Blanchflower also slammed the European Central Bank’s “too-tight” focus on controlling inflation, saying it was based on outdated “German dogma” that must change or “the markets will do it for them.”

“What we really have to think about are rescuing the banks, dealing with this credit crisis, giving confidence back to the euro area, which they’ve not done,” he said today from Hanover, New Hampshire, where he is a professor of economics at Dartmouth College. “And let’s think about how we can organize the next rescue package, which inevitably is going to come.”

European Union leaders agreed last week to a financial lifeline of almost $1 trillion to try to stop contagion from Greece’s debt crisis infecting other high-deficit countries such as Spain and Portugal. Investor concern that tight fiscal policies may choke Europe’s economy contributed to the euro’s 3.4 percent drop against the dollar in the past week.

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