FX.co ★ Europe needs being economical

Opinions on the policy of spending cuts split. Some are critical of austerity, while others regard it as the only possible way to prove creditworthiness.
In his interview, Otaviano Canuto, Vice President and Head of the Poverty Reduction and Economic Management at World Bank, gave his vision of European debt prospects.
First of all, he believes that once there is a clear need for budget adjustment, there are no other ways to avoid it. Debts in the current account and budget leave the Eurozone no choice except for budget adjustment. Mr Canuto is certain that an unstable debt is the worst scenario for any nation and any economic subject in general. The very reason of indebtedness stems from poor creditworthiness. Some try to postpone the adjustment, others carry it out unthoroughly, which leads to defeated expectations and harsh reality where quick debt restructuring seems to be the best option. Otaviano Canuto observes that crises, to some extent, have become more complicated and severe due to protraction, and Greece appears to be a glaring example of the poisoning delays.
Speaking about the US fiscal cliff and an idea of 1$ trillion coin in particular, Otaviano Canuto accepted the stance of the US Finance Department saying that such an “exotic” measure has nothing to do with effective problem solving. Mr Canuto is sure that the US government should focus on fruitful negotiations to reach an agreement.