Evolution of the European debt crisis

An economy has a excessive debt burden when the cost of servicing the debt is greater than the increase in the GDP

At this point investors become fearful of that economy and capital flight begins, which makes the matter worse as the cost of borrowing increases

INCENTIVES FOR NEW CAPITAL TO BUILD NEW GROWTH OPPORTUNITIES MUST BE CREATED

As were finally done after a decade of economic crisis in Latin America from 1982 until 1990 when the Brady plan was initiated

No new capital will go into an overly debt laden economy until the debt burden is decreased either via debt restructuring, money printing or re distribution. This is a fact

Authorities are focused on austerity at the moment in Europe. As was the case in the start of the Latin America debt crisis in 1982. Later they discovered that under these conditions a country cannot grow out of its debt.

Next year the Europeans will figure this out for the periphery countries as the problem does not diseappear. Why doesn´t it diseappear. Because what started the problem is still there - too much debt.

Since periphery countries cannot print money and the German influence on the ECB does not make it a feasible solution for the moment, there will be either FISCAL UNION (CAPITAL RE DISTRIBUTION FROM RICHER TO POORER COUNTRIES) OR DEBT RESTRUCTURING to resolve the issue.

To get new capital into a country need to suggest growth opportunities not austerity. New capital goes into an economy or company because there is a possibility to make money, often from growth. Capital does not go to an investment for pity, the market is not a moral decision maker.