Some the schemes used to solve Latin America Debt Crisis of the 1980s Essay - 1

Some the schemes used to solve Latin America Debt Crisis of the 1980s can be use to the current EU Crisis - Essay Example The Baker plan and the Brady plan can solve the present economic crisis in Europe because they focus on growth of the economy. Countries in Latin America succeeded in solving their debt crisis in 1980s using the two schemes. According to research by economists in Europe, the Brady plan is more effective because it emphasizes on debt reduction. In Mexico, investors’ debts were cleared using the guidelines of the plan (Habermas & Ciaran 107). Interestingly, the Brady plan and the Baker plan are approaches that America use when handling financial crisis for the developing countries. The two plans advocate for sound economic policies when enhancing growth. According to Habermas, & Ciaran (14), the strategy should target least developed economies. The Baker plan identified the countries that needed aid before formulating policies that restructure the economy. This is an indication that European countries should classify their economies before coming up with corrective measures. According to the plan, extending governments should extend the maturity period for loans for countries such as Greece. This will cushion the citizens from crisis. Member countries in the European Union will have to restructure their financial system to improve the economy. The plan equally advocates for intervention by the IMF in aiding ailing economies. IMF should increase lending to commercial banks. Additionally, developed countries should voluntarily reduce debts for ailing economies. The EU government should seek support from Asian economies in creating a balance. For example, the government can encourage the swapping of bonds with creditors from China. This is preferable in the case of Greece. According to Habermas, & Ciaran (2), Latin America received support from Japan in averting their financial crisis. Although the strategy worked in Latin America, it is difficult to estimate the magnitude of a crisis using