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| Source: Wall Street Journal; Getty Images |
Hellenic Republic suffered a run on its banks , closing them on June 29. Payments froze as well as the economic scheme was paralyzed. Greek banks reopened on July xx alongside the aid of the European Central Bank. But many restrictions , including those on cash withdrawals as well as international coin transfers , remain. The crash inwards the Greek stock marketplace position when it reopened Aug. 3 reminds us that Greece’s economic scheme as well as fiscal arrangement are yet inwards awful shape.
Greece’s banking crisis revealed the principal structural work of the eurozone: H5N1 currency spousal human relationship must isolate banks from sovereign debt. To ready this fundamental structural work , Europe must opened upwardly its nation-based banking arrangement , recognize that sovereign debt is risky as well as halt letting countries purpose national banks to fund national deficits.
If Detroit , Puerto Rico or fifty-fifty Illinois defaults on its debts , in that location is no run on the banks. Why? Because nobody dreams that defaulting States states or cities must secede from the dollar zone as well as invent a novel currency. Also , States Earth as well as urban marrow governments cannot forcefulness Earth or local banks to lend them coin , as well as cannot select grip of or redenominate deposits. Americans tin easily seat coin inwards federally chartered , nationally diversified banks that are immune from Earth as well as local authorities defaults.
Depositors inwards the eurozone don’t part this privilege....For the balance , you lot convey to larn to WSJ , Hoover (ungated) or expect xxx days until I'm allowed to post service it here.
Lucrezia Reichlin as well as Luis Garicano convey an splendid Project Syndicate piece on the same topic.
Writing contest: This is our outset paragraph. The Journal's editors idea it was ameliorate alongside latest tidings first. Which plant better?
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