Alternative eurozone bailout: why the world's energy exporters should be coming to the rescue.

AuthorVerleger, Philip K., Jr.

Countries that rely on hydrocarbons for part of their export earnings--such as OPEC members, Russia, Australia, and Canada--earned more than $1.5 trillion from such sales in 2011. These incomes may be halved in 2012 and 2013. In fact, exporting nations could earn less than $500 billion collectively in 2012. The threat to their short-term income comes from Europe's dire financial situation. Energy-exporting countries have greater financial exposure to this than any other nation. The exporters could, however, work together to help prevent the region's economic collapse. What's more, they could probably pull off this deus ex machina with relatively little risk to themselves.

Europe's economic problems have been well chronicled, especially during the last months of 2011. Every leading economist has written on the issue. Many have become regular commentators. The general consensus is that most EU members are solvent. However, Greece's severe problems have undermined confidence in European banks. The banks, in turn, have become increasingly reluctant to lend to many Economic and Monetary Union members except at usurious rates. At the same time, several northern EMU members, led by Germany, have demanded that all EU members (or at least the EMU) institute aggressive austerity packages. The consequence of such belt-tightening plus the weakened banks can only be a serious recession for Europe, one that far exceeds the relatively benign end-of-year economic forecasts.

Europe's problems could be partially alleviated by lending from an outside source. A purchase of bonds issued by solvent EU members (all but Greece as of this writing) that totaled 500 billion [euro] to 1 trillion [euro] during 2012 would go a long way to moderate the crisis. Such buying would drive down the borrowing costs of the EU members most seriously affected by recent events (Spain, Italy, and Ireland, for example). In turn, the lower rates would boost confidence, facilitate additional government expenditures, and possibly even prevent severe recession.

The nations that would benefit most from such an outcome are the energy exporters and, believe it or not, possibly Germany. Energy-exporting countries have more at risk than any other participant in the world economy. Global economic growth will slow if the euro crisis plunges Europe into deep recession. Oil and natural gas prices will surely plummet if this occurs. The incomes of energy-exporting nations will fall off a cliff as...

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