29 Jan 2015
Euro area sinking deeper in a debt trap - BoE Carney
FXStreet (Mumbai) - The Bank of England's (BoE) Mark Carney, in a speech in Dublin, warned that the single-currency area is caught in a debt trap and urged governments in the bloc to loosen up their budgetary restrictions.
Key Quotes:
“It is difficult to avoid the conclusion that, if the euro zone were a country, fiscal policy would be substantially more supportive,”
“However, it is tighter than in the UK, even though Europe still lacks other effective risk-sharing mechanisms and is relatively inflexible.”
“Since the financial crisis all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further. Persistent economic weakness damages the extent to which economies can recover. Skills and capital atrophy. Workers become discouraged and leave the labor force. Prospects decline and the noose tightens,"
“As difficult as it has been, some countries, including the US and the UK, are now escaping this trap. Others in the euro area are sinking deeper.”
Key Quotes:
“It is difficult to avoid the conclusion that, if the euro zone were a country, fiscal policy would be substantially more supportive,”
“However, it is tighter than in the UK, even though Europe still lacks other effective risk-sharing mechanisms and is relatively inflexible.”
“Since the financial crisis all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further. Persistent economic weakness damages the extent to which economies can recover. Skills and capital atrophy. Workers become discouraged and leave the labor force. Prospects decline and the noose tightens,"
“As difficult as it has been, some countries, including the US and the UK, are now escaping this trap. Others in the euro area are sinking deeper.”