EZ's legacy of debt hampers recovery - BBH

Analysts at Brown Brothers Harriman explained that the legacy of bad debt continues to hamper a broader recovery in the euro area. 

Key Quotes:

"Europeans still seem to treat debt as a moral issue. This, in turn, prevents resolving the issue. Many observers continue to talk about the need for the fiscal union to complement monetary union. Others argue for a deeper banking union or a complete monetary union. This all makes sense, but it would still not resolve Greece's problems (or the problem of old debts that hang over several other countries as well).  

Europe needs better bankruptcy rules. For many years, China's reluctance to allow debt failures was seen as a weakness, not a strength.  Similarly, the IMF and many global banks have extensive experience in dealing with sovereigns who cannot make good on their debt. Europe needs to get over itself. Just like the dealing with the Greek crisis in 2010 and 2011 were instrumental in the EU and ECB, so too now, Greece offers Europe an opportunity to put into place the procedures to address solvency for states, which as we have learned, is not made impossible by a common currency.    

Given the cast of characters and political considerations, this is too much. No further debt relief is likely to be announced at the next meeting of European finance minister in the middle of the month. None dare mention it now, this side of the German elections, but the price of this evasion will be that Greece is likely to need another assistance package in the middle of next year."