BRUSSELS (AP) — European leaders are reaching for bold solutions to end a 2-year-old debt crisis that's spread economic misery across Europe, raised doubts about the future of the euro currency, rattled investors and threatened global growth.
Investors have driven up interest rates on Spanish and Italian debt to unsustainable levels, raising the risk those big countries will need a bailout the rest of Europe can't afford.
Even an election that brought a pro-euro-alliance Greek government to power failed to reassure investors that Greece would continue to pay its bills, keep using the euro and avoid a financial crackup that could set off a worldwide panic.
The worldwide financial crisis and the recession that followed ripped a hole in the budgets of many European governments, leaving them with huge debts.
Or excessive government debts — anything beyond 60 percent of a country's output — could go into a "European debt redemption fund," guaranteed collectively and paid down over 20 to 25 years.
Because the redemption fund would be a one-time move, it might be more palatable to Germany than a long-term eurobond plan.
—Handing power to a centralized eurozone budget authority to demand changes in individual countries' taxing and spending plans if they break budget rules.
—Tapping the $625 billion available from the eurozone's two bailout funds to buy government bonds on the open market.
[...] Europe faces the risk of banks runs:
—The European Commission, which writes laws and regulations for the EU, has proposed a deposit insurance fund to protect savers across the EU the way the Federal Deposit Insurance Corp. guarantees up to $250,000 per account in the United States.
Instead of lending money to Spain, pump it directly into Spanish banks and take an ownership stake in them.
The coalition government that emerged from Greece's June 17 election has said it's willing to make the painful budget cuts required under a bailout deal agreed to in March.
Greek voters chose that approach over a government that would have rejected the bailout and likely led Greece out of the eurozone.
The European Commission's banking plans wouldn't take full effect until 2018— not soon enough to calm depositors in troubled Spanish banks or allay fears of a banking crisis.
Investors have driven up interest rates on Spanish and Italian debt to unsustainable levels, raising the risk those big countries will need a bailout the rest of Europe can't afford.
Even an election that brought a pro-euro-alliance Greek government to power failed to reassure investors that Greece would continue to pay its bills, keep using the euro and avoid a financial crackup that could set off a worldwide panic.
The worldwide financial crisis and the recession that followed ripped a hole in the budgets of many European governments, leaving them with huge debts.
Or excessive government debts — anything beyond 60 percent of a country's output — could go into a "European debt redemption fund," guaranteed collectively and paid down over 20 to 25 years.
Because the redemption fund would be a one-time move, it might be more palatable to Germany than a long-term eurobond plan.
—Handing power to a centralized eurozone budget authority to demand changes in individual countries' taxing and spending plans if they break budget rules.
—Tapping the $625 billion available from the eurozone's two bailout funds to buy government bonds on the open market.
[...] Europe faces the risk of banks runs:
—The European Commission, which writes laws and regulations for the EU, has proposed a deposit insurance fund to protect savers across the EU the way the Federal Deposit Insurance Corp. guarantees up to $250,000 per account in the United States.
Instead of lending money to Spain, pump it directly into Spanish banks and take an ownership stake in them.
The coalition government that emerged from Greece's June 17 election has said it's willing to make the painful budget cuts required under a bailout deal agreed to in March.
Greek voters chose that approach over a government that would have rejected the bailout and likely led Greece out of the eurozone.
The European Commission's banking plans wouldn't take full effect until 2018— not soon enough to calm depositors in troubled Spanish banks or allay fears of a banking crisis.
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