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"The only thing good is that we fully fund education, we prevent borrowing, and we avoid the most onerous cuts to the neediest communities".
In the absence of a more potent political solution, the European Central Bank has steadily increased the scope of its activities, most recently intervening in bond markets to prevent borrowing costs for Spain and Italy from reaching dangerous levels.
A large debt may discourage expansion of economic activity because of the fear of high taxes in the future and the realization that the large debt may prevent borrowing for urgently needed local improvements.
The bank did not identify which bonds it would buy, but its statement is likely to be interpreted as a sign that it will intervene to prevent borrowing costs for the two countries from growing unsustainable.
The spreading fears forced the European Central Bank and, later, the Federal Reserve to inject billions of dollars into the financial system to help prevent borrowing and lending in credit markets from freezing up.
Many economists continue to believe that ultimately the E.C.B. will have to intervene more aggressively in bond markets, to prevent borrowing costs for Italy and other countries from becoming so high that they are unable to refinance their debt.
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The euro bond concept is gaining traction among economists and other outside experts like George Soros, the billionaire investor, as a way of preventing borrowing costs for Italy and Spain from rising so much that the countries become insolvent, an event that could destroy the common currency.
If a credit crunch prevents them borrowing, investment will have to be cut whatever their plans.Businesses will certainly invest less if they sense that demand is falling.
Dr. Hahn, an economist, noted that because of Brazil's restrictive lending policies, buyers in the late 2000s were prevented from borrowing beyond their means, unlike those in the United States and elsewhere.
This does not imply however that the migrant remits an infinite amount of money since he/she is prevented from borrowing.
For example, the bank might recommend politically unpopular restrictions on credit to prevent excess borrowing.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com