Symmetrical reflation is the best option for restoring growth and competitiveness on the eurozone’s periphery while undertaking necessary austerity measures and structural reforms. This implies significant easing of monetary policy by the European Central Bank; provision of unlimited lender-of-last-resort support to illiquid but potentially solvent economies; a sharp depreciation of the euro, which would turn current-account deficits into surpluses; and fiscal stimulus in the core if the periphery is forced into austerity.The monetary and fiscal challenges in Europe and the US can only be resolved through one or more of the following multiple avoidance options: (a) default; (b) austerity (e.g., spending cuts and/or tax increases); and (c) monetary expansion (i.e., "printing" money leading to inflation). Prof Roubini is for monetary expansion, which is likely to be the only remaining option once the people make clear that austerity is unacceptable, and governments make clear that defaults are out of the question.
Prof Nouriel Roubini (1959- )
In my opinion, monetary expansion is in the future, both for the US and the Eurozone. Follow the link below to learn more about Prof Roubini's views on the global economy.
Roubini Global Economics
Source: Roubini, N (2011, November 11), Down with the Eurozone, Project Syndicate.