Opinion (Michael Casey, the author of The Unfair Trade, a managing editor at Dow Jones and The Wall Street Journal): “In the annals of world economic experience, 2009 was a terrible year. It was the first since 1945 in which global economic output contracted in aggregate.
“Now, just three years later, we are on the verge of the same happening again. Data releases from around the world last week suggest an alarming, synchronized slowdown is underway. Another global recession so soon after the last one, at a time when an intractable debt crisis is tearing Europe apart while a divided United States is still reeling from the 2008-2009 financial meltdown, could easily undermine international trade relations and even threaten world peace.
“The tensions have turned a breakup of the euro zone into a distinct possibility. If it comes to that it would be a global catastrophe. The international banking system that developed out of the pre-crisis global savings glut is too interconnected to withstand such an event without profound losses and extreme capital flight.
“Having used up ammunition in the last go-round, governments have little fiscal or monetary firepower left. They should instead set aside their domestic agendas and engage in truly coordinated actions. To restore global investor confidence, they need to free up trade, coordinate fiscal and social policies that help rectify savings and spending imbalances, write enforceable rules requiring free-floating exchange rates and uniformly regulated financial sectors, and develop a centralized system for storing currency reserves so that the dollar loses its distorting dominance.”
My Comment: The proposed solutions can only be theoretical because the moment governments will start to undertake any changes, everything threatens to collapse completely. That is exactly what explains the inaction of the EU leaders.