In the second half of this interesting Prichard article it deals with the extent European banks are exposed to debt in the EU crisis economies.
Prichard makes a valid point that America has dealt with the housing crash far better than Europe in part because US debtors have the ability to simply give up on their mortgages and walk away sans risque.. That has helped the US return their economy back to modest growth.
The burden of public and private debt in Europe is instrumental in prolonging the crisis and pushing the entire European Union states towards recession. It’s a log jam which nobody seems to have any inspirational idea how to fix.
Personally I have come to the conclusion EU banks need to take a substantial haircut on these debts and then be recapitalised by the ECB and BOE. People struggling with mortgages they cannot afford should have them written off and the properties sold for their real worth.
Lenders in the future should be regulated regarding the level of debt they can lend. As Pritchard says mortgages should then be eventually limited to 60% of loan to value. We all then might be able to return investment to a property market in Europe which is stable for the future and does not produce ‘Mickey Mouse’ inflationary price increases and chronic over supply.
Property would then actually return to a position where value was sustained and confidence in the market returned.
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