economics

 What is the solution for Spain? My recommendation is that they adopt their own currency again, set about the level of the American dollar. This would make 1 Euro equivalent to currently $0.77 US. It it were kept at about 80c that would make exports to Europe cheaper, and encourage exports, with benefits both ways.

With Portugal, (a smaller nation geographically, and hence likely to be swallowed up financially, also having their own currency at about the same rate as the current New Zealand dollar, or about 80c Australian, and about the same to teh American dollar, this would allow the economy the flexibility of an appreciating currency if it did well.

The next three years are vital. This time should not be wasted, allowing the economies of Europe to stagnate. What is needed is a common taxation rate, and a comprehensive welfare system similar to New Zealand's.

This means pensions for the elderly. The key to stimulating the economy is giving the elderly the financial strength to remain in their own homes.

This means across the board rates relief. This is through a 10% tax on motor spirit (petrol with a 10% alcohol content), and an initial approx. 500 rebate to rate payers. In the second year, this 500 euros would provide a credit (transferrable, or able to be sold for cash) towards a solar powered electric panel/s. There is also an urgent need to increase wages.

This crisis is because houses have been gaining in value by 10% to 20% per year, for the last 30 years, while wages have moved only slightly. Wages rising regularly is a cause of inflation, because as they rise, prices rise. The solution s to pay only 2% interest in the accounts in the National Bank.

Unemployed must be eligible for a benefit, at least 50% of the minimum wage. They must also be required to work one day a week and work found for them. With a flat rate of tax at 20% this also represents their tax obligation, although it is anticipated that they receive an additional payment for this of approximately 100 Euros.

So in summary a population can pay for free education, free health care, a welfare system and apension from 65 or 60. The price is 20% income tax, 27% company tax (flexible) and a GST of 17%. This is 37%, quite high.

Across Europe, this should be 23% income tax, 8% interest paid on tax above this, and the money returned as soon as possible, and a GST of 10%.

If minimum wages are kept the same, and all government employees on the minimum receive another $2 (2 Euros per hour for their 40 hour week, that provided an additional 80 Euros a week. Some of this comes back as tax. Some of it comes back as the 10% GST, every time somebody buys something. Those on twice teh mimimum receive 4 Euros an hour more, and those on 3 times (nurses and teachers) receive an additional 6 Euros per hour.

This must be paid for by borrowing, and this is from a National bank owned by the Bank of England. This is not a retail bank, although it could be if one is available for sale, but let us value it on its assets, it's real estate, and not its income from deposits and loans, because customers are free to leave. The purpose of this bank is to hold sufficient national currency (Euros or Pesos) to cover borrowings. The target is to keep borrowing to 8% or less of GDP, but the interest rate (to the Bank of England) is 5%.

The downside of all this is that bank interest rates (ti ordinary borrowers with a first morgage on a property will have to rise. The Bank of England can lend to teh government enough to cover this, at 8%, so bank margins will have to be slashed. This means 1% to .25%, and so to keep interest payments manageable, equity on loans will have to be increased to 50%. This may mean some people will have to sell and buy a more modest property. On the other hand, if they keep paying the interest, ther will be no pressure on them to repay the principal. They can reduce their debt at their own pace. The bank will continue to receive 8.25%. This is because the alternative is for the banks to find finance, other than from the government at 2.5%, from teh open market. This means 10% because it isn't available.

Governments are borrowing money, from who knows who, at who knows what interest rate, and lending it (back to the banks they borrowed from) at 2.5%. They should be paying 5%. At least 4%. In addition, local councils who have high debt, must be allowed to refinance their loans, (pay them  off) with money teh government will lend them at 6%, with no repayment scheduled. Even a morritorium on interest is possible, but the debt cannot be written off. Governments must just not "qualitatively ease", or just print money. They must borrow it against assets they are prepared to forfeit in teh event of a default.