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The Greek government and its creditors, having been in negotiations all week, are apparently close to agreement. The Governor of the Bank of Greece, George Provopoulos, expressed to Reuters the severity of the situation, saying, “If we ignore reality this time, the outcome will be a given: the country will become economically and politically isolated.” Provopoulos has been echoing the importance of austerity measures being pushed by most European leaders. Meanwhile, France and Spain auctioned off their debt by selling bonds and treasury notes this week. As a consequence, European stocks rallied higher at the end of the day yesterday. However, France and Spain, along with Austria and Italy, had their credit ratings downgraded by S&P on Friday the 13th. Fitch, another ratings agency, has suggested in the case of Italy, that the European Central Bank (ECB) “ramp up its buying of troubled euro zone debt to support Italy and prevent a ‘cataclysmic’ collapse of the euro.” What Fitch is suggesting is contrary to the standard response of Eurozone nations, who have taken up severe fiscal austerity measures, sparking mass protests across the continent. According to economic analyst, Marshall Auerback, this is actually a wise course. He says, Europe’s “solvency crisis can only be solved by the ECB: It is the only entity which is in a position to buy unlimited quantities of national sovereign bonds in order to ensure that these countries do not continue to pay ruinous rates of interest and suffer further declines in economic activity as a consequence. Fiscal austerity only adds to the problem.” Meanwhile, Reuters polled 600 economists yesterday, who agreed that Europe’s debt crisis “would drag on global growth.” But, while the global economy will stagnate, the economists polled say it will continue to move in the right direction.

GUEST: Marshall Auerback, a Fellow at Economists for Peace and Security, and a Research Associate at the Levy Institute.

Read Marshall Auerback’s article on Alternet here.