George Liu's  Instablog

German Chancellor Angela Merkel, according to The Telegraph, is starting to soften her position on a potential redemption pact, a pact she rejected last November as "totally impossible." A source in her office said "It (the redemption pact) is conceivable so long as there is proper supervision of tax revenues." If Merkel agrees to implementation of the Redemption Pact eventually, this could be a significant step in the direction of a Eurozone recovery.

The redemption pact, considered by many to be an ingenious plan to mitigate the eurozone crisis, would result in each country's debt above 60% of their GDP being pooled into a redemption fund. The Euro states would in turn have joint liability for the debt placed in the fund. The debt would in turn be paid over the next 20 years, as participating countries would enter into payment obligations towards the redemption fund. This redemption pact would return European countries to abiding by the Maastricht Treaty's rule that a Eurozone country shouldn't have debt in excess of 60 percent of its GDP. Many consider this to be a much more favorable alternative than continuing austerity measures and this plan has the potential to lift Southern Europe out of its current economic bind.