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By Mohamed El-Erian
Published: November 29 2010 11:26 | Last updated: November 29 2010 11:26
Europe tried to strike a delicate balance this weekend. It granted emergency loans to boost liquidity, an approach that has visibly lost traction in containing the dislocations in the continent's periphery. But it also moved towards a more durable approach to tackles solvency problems, although one that involves greater risk of collateral damage.
The new liquidity package does little to deal with Ireland's debt overhang, or to reduce the embedded cost of its debt. Instead it aims to introduce stability into market conditions, which in turn should allow the Irish government to implement its recently announced austerity package.
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