Next phase of financial crisis may be the hardest

It took $5 trillion and an unprecedented global coalition of G20 countries to stabilize the economy after investment bank Lehman Brothers collapsed in 2008. Quelling the next phase of the financial crisis may be even harder. To stop the panic that erupted nearly two years ago, governments transferred a mountain of debt from private to public accounts. Now, those government debts are distressing financial markets and there is nowhere left to shift the burden. Europe's clumsy response to Greece's debt woes highlighted the economic and political headaches that await debt-laden countries and those who finance their borrowing. European leaders have yet to convince investors that they have a credible short-term plan to contain government deficits and a long-term answer to the region's slow growth. Until they do, financial markets will remain volatile, and the hard-fought economic recovery is in jeopardy. "Europe is trying to solve a debt problem with further debt," said Domenico Lombardi, president of the Oxford Institute for Economic Policy. Fixing the problem will require money and political will. One cannot work without the other, and both are lacking.