How to prevent the euro zone from being stifled by debt (public and private): An unorthodox proposal (which has no chance of being accepted)

- "The euro-zone economy risks being stifled by debt (public and private) due to its low level of long-term nominal growth. A reduction in debt ratios therefore requires an effort of public and private savings and spending cuts which destroys growth (as was seen in Japan for private debt, whereas in the euro zone public debt is also likely to be involved and the situation is therefore likely to be worse than in Japan)."
- "To avoid this situation of asphyxiation by debt, the following (desperate) plan could be imagined:
force through a 20% wage increase in all the euro-zone countries;
give the ECB instructions not to react to inflation but to devalue the euro by 20%."
- "Price competitiveness would then be maintained and there would be a reduction in debt ratios due to negative real interest rates, while demand and investment would be stimulated."
- "Be reassured, this plan will never be applied."
Natixis Flash Economics 342 20100701

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