(this is rather disordered and not very thoroughly though out, but ...) ...
Given the role of the central alliance of Merkel and Sarkosy and their combined efforts to harmonize a euro strategy with the IMF and others, one largely basedon austerity and full commitment to maintaining the value of previously established debt instruments, is this whole thing now about to actually explode.
A growth and inflation solution is one that does and has worked in the past in some regions and times. Inflation devalues the debt, growth increases receipts, and over time the fact that one was leveraged 110% can move swiftly to 10% on a current cash-flow basis.
This threatens significantly the owners of debt instruments essentially enforcing a revaluation based on current income (to some extent). Who cares if I owe a billion dollars if a billion dollars is only worth a loaf of bread. Debt is effectively liquidated a the expense of the owners of that debt. The consequence of any such transition is to discourage saving, encourage consumption, and to subordinate the value and power of the debt instruments to a graveyard of insignificance.
The risk is in matters of investment, as stagnate assets suffer a withering erosion of near instant devaluation, the whole mucky muck becomes rather convoluted. I have always been one of inflating debt away. But it is hard, very hard, on the owners of those instruments, and they are the folks of power.
Inflation in the extreme can fatally undermine the notion of formal currency, so obviously there are limits. Cooperation in even the most primitive ventures evaporates with the dissolution of some sort time value to formal currency.
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Hmmm.
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