Regular readers know that the alternative is to adopt the Swedish Model and require the banks to recognize upfront the losses on the excess public and private debt in the financial system.
When banks do their fair share, the real economy is relieved of the burden of servicing this debt. This frees up capital to be reinvested in growing the real economy.
A top official with China's sovereign wealth fund has issued a blunt warning that the latest unrest across the eurozone shows austerity has stretched the public's tolerance "to breaking point".
Jin Liqun, chair of the supervisory board of the $480bn (£300bn) China Investment Corporation (CIC), ... has been extremely critical of Europe's handling of the debt crisis, warning that authorities have taken a piecemeal approach and suggesting Greece should be given more time to work off its debt. ...
Speaking at a forum in Beijing on Friday he repeated his warning that governments had spent unsustainably in the past.
But he went on to warn that Europe was now seeing social and political unrest across several states.
"One commonality is that unions are now involved in organised protests; demonstrations and strikes. It smacks of the solidarity movement witnessed in the 1930s," he said.
"The general public's tolerance of austerity has been stretched to breaking point."...
He went on: "The eurozone needs to strike a proper balance between austerity and growth. Austerity without growth is a cul de sac."Requiring the banks to absorb the losses allows growth in the real economy to resume. This growth allows some level of austerity to be pursued.