step by central banks is not a lasting solution

Recently, the central banks of some developed countries like the US, Canada, Japan, Switzerland, Britain and the European Central Bank (ECB) have agreed to lower the cost of existing dollar swap lines by 50 basis points. Sounds Greek? Well, we don't want to confuse you more by getting into the nitty-gritty of the matter. The important point here is that this will make it easier and cheaper for the troubled European banks to make dollar loans. So far, they were finding it expensive to do this and had little choice but to sell euros. This in turn hammered the value of the euro and also restricted credit in Europe. And now, this new development will make dollars easily accessible to European banks. The central banks seem to think that this measure will prevent a cred it crunch from striking the glob al economy.

But will this solve the European debt crisis? Not at all. The problem with central banks across the globe is that they have been trying in vain to solve a problem of excess leverage by more leverage. But homoeopathy doesn't work in the world of economics. By infusing more liquidity into the system, one can only expect to delay and worsen a looming crisis and fuel inflation. There is not going to be any real solution for the Eurozone economies without some painful touch reforms. And that calls for a lot of political will which seems to be totally lacking.