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New Proposal Suggests Making Bailouts Profitable For Everyone

ByBenzinga
AuthorBenzinga
Published 07/22/2013, 06:25 PM
Updated 05/14/2017, 06:45 AM

The euro traded at $1.31 on Monday morning as Portugal worked to calm markets by easing some of its political tension.

After some high ranking government officials resigned due to a dispute among the coalition members, the nation's government has been holding together by a thread. The instability has caused doubts about the eurozone's stability to resurface after months of calm.

Last week, Portugal's coalition and the Socialist opposition attempted to work out their differences and come to an agreement about how to handle the nation's bailout program. However, the talks proved unsuccessful and left Portugal without any resolution.

But markets found some relief in news that Portuguese President Anibal Cavaco Silva turned down the idea of a new election on Sunday. Reuters reported that Silva is supporting the centre-right coalition government, and has backed the idea of staying on track with the country's bailout program.

A new type of rescue fund has been proposed which would keep Germany's tax payers from shouldering the burden of their failing neighbors. French economist Oliver Garnier proposed that Germany invest its current account surplus in weak southern nations in order to help promote growth.

According to the plan, loans would be more of debt for equity investments and would offer Germans a better return, making the deal profitable for all involved.

The proposal has been criticized by struggling southern nations like Spain and Greece, who believe it too closely mimics German colonization. With such a large gap between the Northern European countries and Southern European Countries, though, the fund could be a viable option.

BY Laura Brodbeck

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