John Paulson on the European Debt Crisis

John Paulson, founder and president of the famous investment firm Paulson & Co, wrote a column in the Financial Times. It was published yesterday afternoon.

In the piece, Paulson writes that the European Central Bank should guarantee Continental Europe’s sovereign debt.

“Drawing on our experience restructuring companies along with lessons learned in the US following the bankruptcy of Lehman Brothers, we suggest the ECB consider a sovereign debt guarantee programme as a solution to the European sovereign debt crisis,” writes Paulson. “Such a scheme would be similar to the successful Temporary Liquidity Guarantee Program adopted by the US’s Federal Deposit Insurance Corp to stem the financial crisis after the failure of Lehman by enabling financial institutions to refinance their maturing debt and avoid a default.” He explains that this is a way to stave off the the debt crisis there without causing inflation. “An ECB sovereign guarantee programme would immediately calm the credit markets. It would be non-inflationary and would allow Italy and Spain (and other countries, if necessary) to refinance their maturing debt at reasonable rates.”

(Click here to read the full column, source FT.com)