Sovereign Debt Crisis in the EU zone

It's clear that the next few weeks could be quite decisive for the Euro, the EU zone and the troubled EU countries in particular. The pressure to effectively drive political discussion has now been maximized and this has without a doubt put the EU is it its finest hour. This was all to be expected and it's simply a logical consequence of the ambition to grow towards an EU that's capable to play its role on the global stage. The time has come to take courage and implement the ambition, through a joint political effort. The problems in the EU zone are related to both fiscal- and monetary issues . The economic downturn has revealed the simple truth that the individual EU countries can and should not individually deal with those issues anymore, but need to work together to resolve them.

Insolvency and bankruptcy

The EU need define legislation to deal with insolvency and bankruptcy of individual member states. The EU as whole is neither insolvent nor at risk to move into default, so there's no need to call on the IMF. However, there are some serious issues in three individual EU countries, namely Greece, Portugal and Ireland. These issues should however be considered as issues which are more comparable to problems within the context of individual countries. There are, for example, several "weaker" cities and provinces in the Netherlands, but it does not make any sense to state that the Netherland as whole is insolvent, neither that these individual provinces should individually call on the IMF or on the European Financial Stability Facility (EFSF). This "credit protection" legislation is required to protect the EU as whole and the individual creditors, within and outside of the EU. It is also required to protect the EU against large scale hedging, such as the one launched against the British Pound in 1992. This is the bottom line: if solvency issues can not be properly addressed, then such speculations could happen again, e.g. to force Greece out of the EU.

The European Monetary Fund

The issues in the EU are also very much linked to global issues and the global institutions that deal with them. There's currently much speculation on how the IMF should be run and by whom, after the dramatic fall of mr Strauss-Kahn. The IMF has always been traditionally run by a European. Both the EU and the rest of the world should prepare for the fact that this rule will be discarded as a relic from the past. Next to the EU, there are emerging economic powers that naturally face similar issues, so they will claim their stake. The EU should prepare for the fact that it needs to resolve its problems by itself. The EFSF should be transformed into a structural, long term solution, and become a European Monetary Fund, next to the IMF.