Housing and housing finance At the root of the global financial crisis, the troubled US housing market continues to act as a millstone around the economy s neck.

But soon they encounter their own banana peel indeed, today s global economy is a riot of slipping economic models.

As Carmen Reinhart and Kenneth Rogoff argue, recoveries from crises that result from over leveraged balance sheets are slow and typically resistant to traditional macroeconomic stimulus.

The European Union has finally committed itself to helping its financially distressed members.

It loaned on little collateral to shaky banks.

These social anxieties are not being addressed because financial sector bailouts, stimulus packages, and help for distressed industries with strong lobbies are testing many governments financial limits.

In the rest of struggling Europe, price adjustment is barely noticeable.

It could also be relevant to purchases of debt from distressed member states.

Europe s leaders recognized that distressed countries debts would become unmanageable unless their economies could grow, and that growth could not be achieved without assistance.

Our lending can provide breathing space for countries in difficulty.

Now, reported NPLs amount to little more than 1 of assets.

For example, in financially distressed Spain, unemployment now exceeds 20 .

Investors in Europe s troubled economies are already getting enough as it is.

Indeed, while China s overall capital stock is by no means small, capital structure and maturity mismatches have led to the accumulation of massive volumes of non performing assets, undermining China s economic stability and financial efficiency.

So you would think the same would be true for US households and embattled European governments.

And parts of the country are more similar to sections of troubled developing countries than to China s showplace cities.

Europe and Japan are both facing difficult challenges, including rapidly aging populations and sputtering economies.

These are the right principles. They could be applied more effectively by capitalizing the institutions that are burdened by distressed securities directly rather than by relieving them of the distressed securities.

But, like the struggling countries of southern Europe, France has few options.

MUNICH In blatant violation of the Maastricht Treaty, the European Commission has come forward with one bailout plan after another for Europe s distressed economies.

Nonetheless, the German model does hold some useful lessons for the eurozone s embattled peripheral countries today.

Furthermore, the point was not to help private banks get rid of their troubled assets.

Even for distressed households that have borrowed long term, the effects of higher inflation are uncertain.

Breaking the negative feedback loop between distressed sovereigns and distressed banks whereby bank rescues exhaust fiscal resources and make it likely that the next financial institution in trouble will not be able to count on government support requires ensuring that it will not recur even in extreme circumstances.

Meso economics studies the institutional aspects of the economy that are not captured by micro or macroeconomics.

Just ask any of the large international banking groups headquartered in financially stressed eurozone countries.

It needs either the ECB or an expanded European Stability Mechanism to purchase distressed governments bonds today.

Nothing less will persuade investors to go near debt issues from the eurozone s fiscally challenged members.

Instead, Europe will have to rely on wage flexibility to enhance the competitiveness of its depressed regions.

And, with a single supervisor in place, the ESM will be permitted to inject capital directly into troubled banks.

Unlike some months ago, now the European Central Bank can intervene and buy troubled countries debt.

Not surprisingly, workers are leaving the eurozone s crisis countries, but not necessarily for its stronger northern region.

Worse, some of the troubled countries inflation rates are still running higher than those of their trading partners.

Finally, earlier this month, they decided to devote 100 billion to help Spain clean up its ailing banks.

A cut in policy rates or quantitative easing by another name will do nothing to enhance the troubled southern European economies competitiveness.

In such a scenario, non performing loans in China s banking system would probably amount to roughly 1 trillion.

Blame the Economists, Not Economics

In many of the troubled emerging economies, however, monetary policy has shouldered the burden of controlling inflation, managing the local currency s value, and supporting growth.

The challenge now is for the presidency and the Commission to give fresh political impetus to the EU s stalled reform drive.

The risk premia that financially distressed countries must pay remain high and signal continuing risk.

LONDON Germany has been leading the opposition in the European Union to any write down of troubled eurozone members sovereign debt.

Third, discussions are being held to prepare the next steps, namely how to arrange the resolution of failed banks and support for ailing ones.

But it recognizes that what Europe s troubled countries need most is not money, but the planning and administrative capacity to spend it effectively.

With citizens of distressed countries bearing the fiscal burden of the crisis, the enduring presumption that they will not act responsibly is patronizing, at best.

If troubled eurozone countries, especially Spain, start growing rapidly again, there is still a muddle through outcome that might work.