Saturday, March 10, 2012

Can Friendship Between Merkel and Legarde Resolve Their Differenences?

This article devotes a lot of space to the personal relationship between the head of the IMF and Germany's Chancellor, as well as a snapshot of their different backgrounds and their paths to leadership positions. It does, however, provide a short summary of some of the issues that lie beneath a solution to the economic problems in the eurozone. The IMF would like to raise $1 trillion to support countries in financial difficulty. It believes that this will discourage speculation on interest rates. The IMF also would like the strong economies to use pro growth policies to compensate for slow growth in the rest of the eurozone. Merkel believes that the firewalls will give the debtor countries a false sense of security and impede their efforts to make the necessary structural reforms that will make them more competitive. Austerity is the path to success. German leaders are also suspicious of advise from American leaders. They believe that the administration is focused on the 2012 elections and that recession in Europe may affect the US economy prior to the election. Merkel also has to deal with political sentiment in Germany which is against sending money to the troubled economies.

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