Exploding national debts, imminent state bankruptcies: What lies ahead?

Since the outbreak of the financial and economic crisis, an enormous increase in government budget deficits and debt has been seen worldwide. What does this mean for the European Monetary Union? Charles B. Blankart and Erik R. Fasten, Humboldt University, Berlin, consider it desirable "to start with the article on non-dissolvability and to combine this with a procedure similar to that of the euro stability pact. The member states agree to assist restructuring. But if this is fruitless, at the end we have not the dissolution but national bankruptcy. Jörn Axel Kämmerer and Hans-Bernd Schäfer, Bucerius Law School, Hamburg, see the European Union on an extremely narrow ridge. The EU must not soften the bail-out prohibition to such an extent that the exception becomes the rule; this would damage the euro. But it can also not remain inactive since it is likely that the whole system may be jeopardised by the turbulence that develops if a state is denied support. Jörg Asmussen, Federal Ministry of Finance, underscores that the Stability and Growth Pact proved itself to be an effective fiscal policy coordination instrument. During the economic and financial crisis, the pact's flexibility was used in order to allow appropriate fiscal policy responses. However, the rules are now being applied more restrictively. This means that all member states must come to grips on their own with their budgetary and/or structural problems. For Christian Tietje, University of Halle-Wittenberg, the member states of the euro group must continue to be responsible for their own economic policy; financial solidarity measures must remain an ultima ratio in the euro area. Michael Kühl and Renate Ohr, University of Göttingen, are of the opinion that highly indebted countries, such as Greece, must find a way to consolidate their state finances on their own without financial support from the partner countries.