Analyst Says Eurozone's Only Option to Print Money
The only escape left for the Eurozone debt crisis is to resort to printing money, said SEB private banking analyst Peeter Koppel.
"There is one economic measure that has not yet been used to solve the crisis at hand - if the European Central Bank were ready to buy up, without limits, the debt of problem countries i.e. print money," said Koppel in an interview with Kuku Raadio.
"At the moment, it may still seem politically uncomfortable, but we are moving in that direction. Before [we resort to printing money] we will still see many top-level summits where various new schemes will be proposed, but which will with a high probability end up the same way as all of the earlier rescue schemes," said Koppel.
The alternative, Koppel said, would be spiraling deflation in which many loans simply won't be paid back. An uncontrollable flood of bankruptcies and liquidations is clearly not something EU officials want, said Koppel.
So far, fears, Especially in Germany, of the rising inflation that would come along with printing money have been the main obstacle on that course.
"Of course, this wouldn't be a solution, but a transformation of the problem into another, which would allow the largest number of people in the Eurozone to comfortably live through the problem," said Koppel.
The cost of borrowing on Italian government bonds climbed to an unsustainable 7 percent on Wednesday.
Ott Tammik