The European Crisis, Experts Have Little Hope for a Quick Fix

It happened several times in recent months, the debt crisis is over. Stocks stage strong comeback in addition to the expectation that a solution was found. Then they quickly resumed their decline hopes evaporate, leaving investors confused and frazzled.

What’s happening?

The problem, say observers close to the financial crisis subprime in both 2008 and the debt crisis of the European public today is that many investors believe there is a quick and easy, if only the officials can agreement and act decisively.

In fact, one could not exist. A best-case scenario in Europe is a government rescue troubled banks and to keep the financial system of a major shock and send the world’s economies into recession.

The recent rescue plan for European approval by Germany on Thursday after Chancellor Angela Merkel won a parliamentary vote, throwing the financial burden of the continent’s largest economy behind a new agreement.

However, a rescue plan will not erase the huge debts that have taken years to accumulate – as the rescue of U.S. banks in 2008 did not end with the huge amount of high-risk debt that the owners had borrowed, but could not afford.

The problem – too much debt and growth is not enough to lighten the load – could take several years to resolve.

“Everyone was living beyond its means for almost the past ten years, is a setting that will be long and painful, and that will test the resilience of societies and social policy,” said Nicolas Veron, a researcher Bruegel, a Brussels research group.

This does not mean that the debates in Europe are not applicable. If governments do not agree on how to save Greece from its debilitating debt, some fear the worst that could happen – a financial meltdown similar to that of 2008 which in turn throughout the world, condemning Europe, but also in the United States and emerging countries to a protracted slowdown, or worse.

Just as in the United States, Europe, built in trillions of new debt in subsidies in recent decades. The difference is that the more the United States was borrowing for consumers and businesses, while in Europe it was mainly the government piled on debt, to help banks lend them money by buying their sovereign bonds.

Now, as the U.S. economy is hampered by households whose mortgage is still under water, and do not start using again until they brought down their debt, the Europe can not begin to grow again until the country learn to live within their means.