euro – Page 2 – Slugger O'Toole

Euro Crisis : Germany and Spain at war!

Mack on June 19, 2010, 2:53 pm

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Be afraid, very afraid. Zero Hedge on those German leaks to force greater Spanish austerity, and the Spanish retailation to force the publication of Euro banks stress testing. One of the more ominous news of the day came from Reuters, which reported that the previously disclosed rumor that Spain was seeking a €250 billion bail out package, had in fact originated from high-placed German officials. The move, which will could easily set off an intraeuropean cold war, was prompted by …

Euro crisis: “The commission is the economic government of Europe.”

Pete Baker on June 16, 2010, 12:58 pm

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The BBC has a country-by-country guide to the EU austerity measures, including the bickering France and Germany. And, as the Irish Times reports, EU Commission president, José Manuel Barroso, lays down the law Amid intensive debate among European governments around measures required to reinforce the euro’s foundations, Mr Barroso said some of the member states needed to be reminded that the commission was “the economic government of Europe”. France and Germany have been at loggerheads over the scale of the measures …

Euro crisis: “Germany and France have to be of one opinion, otherwise Europe is sick”

Pete Baker on June 15, 2010, 2:56 pm

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German Chancellor Angela Merkel and French President Nicolas Sarkozy are presenting a united front in public, and pointing at a global bank levy. But, as the Irish Times reports, behind the scenes things are not well with the European leaders In an hurried show of unity, the two leaders penned a joint letter to the European Commission, urging it to speed up efforts to regulate EU financial markets. Ahead of yesterday’s meeting, French finance minister Christine Lagarde insisted that a new …

Counterfeiting operation posed potential threat to euro

Pete Baker on June 13, 2010, 5:39 pm

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The Sunday Times has details of the scale of the counterfeiting operation that was uncovered in County Laois last month. From the Sunday Times report Detectives assigned to the fraud investigation, led by Martin Callinan, the deputy garda commissioner and intelligence specialist, believe the gang planned to sell the forged currency at 10% of face value to the Russians, who in turn planned to launder the fakes through contacts in eastern Europe. “We also know that a number of Irish gangs had …

Euro crisis: Paradigm Lost

Pete Baker on June 11, 2010, 1:50 pm

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The BBC’s Europe editor, Gavin Hewitt, has been examining “an in-depth analysis of the crisis in the eurozone” by the Carnegie Endowment for International Peace – “Paradigm Lost – the Euro in Crisis”. From Gavin Hewitt’s blog So what’s to be done? According to the economists in the Carnegie report, the PIIGS will have to reduce their debts, which most are attempting to do with austerity packages. The debt-to-GDP ratio needs to be on a firm, downward path and to be …

Euro crisis: a “strong convergence of views”

Pete Baker on June 8, 2010, 1:20 pm

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The Irish Times’ Arthur Beesley reports that EU Finance Ministers “have resolved to submit draft budgets for the approval of their counterparts and the EU Commission before unveiling them in national parliaments.” European Council president Herman Van Rompuy, who chaired the meeting on economic governance, said there was a “strong convergence of views” on the measures required to strengthen how the EU polices and enforces budgetary rules. The meeting followed a separate gathering here of ministers whose countries share the …

ECB : There are no alternatives

Mack on May 29, 2010, 11:21 pm

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European Central Bank executive member Lorenzo Bini Smaghi outlined the fiscal and monetary constraints facing EU states at the Group of 30 conference in Rabat. In it he warns of a US of future crisis, and perhaps controversially denounces Keynesianism as inappropriate. European states can’t rely on inflation to reduce their debts, fiscal austerity is the only course available to them, but Americans may be deluding themselves that they will be able to impose an ‘inflation tax’ on investors in …

Euro breakup : Why Morgan Stanley is wrong

Mack on May 28, 2010, 10:36 am

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A few months back Morgan Stanley analyst Joachim Fels produced a set of warning signs that would indicate the Eurozone was at increased risk of breakup. He’s back today with a new research note – To be clear, we neither advocate a EUR break-up nor is this our main scenario. However, the risk that it happens is far from negligible and the consequences for financial markets would be severe. Given recent developments, a break-up scenario has clearly become more likely, …

“everyone in Ireland is an economist now”

Pete Baker on May 26, 2010, 3:32 pm

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Mack referred in passing to the Guardian’s G2 feature on Ireland at the start of the crisis in the Eurozone, but it deserves a bigger mention. Here’s a key extract “There were very few of us in the boom who suggested what was going on was nonsense. If you’re against consensus in Ireland, the first phase is ridicule, then it’s violent opposition, and the third phase is universal truth – where everyone pretends they agreed with you all along,” [David] …

Euro crisis: Where are they getting the money to do that?

Mack on May 25, 2010, 11:11 pm

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Hat tip to The Big Picture for this entertaining, Australian, look at the Euro crisis. From the transcript – BRYAN DAWE: How much does Greece owe, Roger? JOHN CLARKE: $367 billion. BRYAN DAWE: Correct. And who do they owe it to? JOHN CLARKE: Mostly to the other European economies. BRYAN DAWE: Correct. How much does Ireland owe? JOHN CLARKE: $865 billion. BRYAN DAWE: Correct. Who do they owe it to? JOHN CLARKE: Other European economies mostly. BRYAN DAWE: Correct. How …

Irish budget cuts: Not speculation, or existentialism but hard-nosed finance

Mick Fealty on May 23, 2010, 3:42 pm

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Lot’s of really interesting snippets in the Sunday Business Post. Two struck me as worth noting. The first notes that after a narrowing of the interest rates on the bond market, Ireland’s rate of borrowing is getting more expensive again. By Friday evening, ten year Irish bond interest rates were trading at about 4.7%, about 2% above that of German debt and above that of Portugal. The second (and I suspect it’s not entirely unrelated) is the news that the …

Euro crisis: “there is no unity at present in the euro zone about what needs to be done”

Pete Baker on May 22, 2010, 6:01 pm

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A couple of reports in the Irish Times to emphasise a point made recently by Tim Garton Ash. First up a quote from the German Chancellor, Angela Merkel. “We are at the start of this work and there is no unity at present in the euro zone about what needs to be done,” she said. “We have to stabilise things first, exchange views and at a later point say what needs to be done and how, and where we have …

Euro crisis: “Here endeth the lesson from the voice of calm.”

Pete Baker on May 21, 2010, 5:29 pm

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Even though the EU Finance Ministers meeting in Brussels didn’t have the details of that special vehicle for bailing out eurozone governments to sign off on, the BBC’s Stephanie Flanders still believes in “the voice of calm”. Me? I’m still sceptical. As Stephanomics admits In the end, these imbalances always come home to roost – the private-sector bubble that was causing them bursts, and one way or another the borrowing is shifted onto the public sector. And governments have to do …

Euro crisis: “The crisis of the eurozone has only just begun.”

Pete Baker on May 20, 2010, 3:28 pm

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I hope it wasn’t something I said… At the Guardian’s Comment is Free, Timothy Garton Ash feels “more depressed about the state of the European project than [he has] for decades.” The crisis of the eurozone has only just begun. The bond markets have not been convinced even by last week’s giant “shock and awe” bailout of Greece. The one thing that moved them was the European Central Bank’s readiness to start buying eurozone government bonds, but it still costs …

Baseline Scenario : The (very bad) luck of the Irish

Mack on May 20, 2010, 1:45 pm

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Simon Johnson and Peter Boone turn their attentions to Ireland – their analysis is truly shocking and is informed by a valid (and obvious) adjustment. They use GNP in preference, as a superior indicator of Ireland’s ability to repay debt, to GDP. I’m surprised this hasn’t been used more commonly when discussing the deficit. When we adjust Ireland’s figures accordingly, the situation is dire. The budget deficit was about 17.9 percent of G.N.P. in 2009, and based on European Commission …

Euro crisis: “None of Europe’s leaders are yet spelling out the cultural revolution that is to come.”

Pete Baker on May 19, 2010, 6:35 pm

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I missed this at the time, but the BBC’s Europe editor Gavin Hewitt’s thoughts on “one of the fundamental dilemmas in political leadership” being faced by eurozone politicians caught in a manifestation of “the political trilemma of the world economy” are worth reading. Within the EU there is tension, and at its heart is the role of Germany. The Germans never wanted to join the euro if it meant it would have to bankroll the weaker countries. That is what has happened. …

Euro crisis: “We all know what to do, but we don’t know how to get re-elected once we have done it.”

Pete Baker on May 18, 2010, 7:19 pm

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In the Irish Times, Arthur Beesley identifies “one of the fundamental dilemmas in political leadership” being faced by eurozone politicians caught in a manifestation of “the political trilemma of the world economy” This presents a cocktail of nasty choices for EU leaders, many of whom seem more comfortable in the local arena than in the European amphitheatre. Previously, they were free to do as they pleased in a currency system that did not hold debt-addiction to be any great sin. Now, national …

Euro crisis: Wages in the periphery need to fall 20-30% relative to Germany.

Mack on May 18, 2010, 5:08 pm

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Paul Krugman isn’t pulling any punches on what restoring competitiveness within the Euro will mean for the peripheral countries. Neither does David McWilliams’ on Ireland’s future inside or out of a currency union with Germany.

Euro crisis: The shrinkage of politics?

Pete Baker on May 17, 2010, 9:16 pm

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Via a post by Crooked Timber’s Chris Bertram. Here’s a point worth considering from Dani Rodrik on the growing crisis in the Eurozone. Deep down, the crisis is yet another manifestation of what I call “the political trilemma of the world economy”: economic globalization, political democracy, and the nation-state are mutually irreconcilable. We can have at most two at one time. Democracy is compatible with national sovereignty only if we restrict globalization. If we push for globalization while retaining the nation-state, we …

Euro crisis: The Hollow Euro

Mack on May 17, 2010, 12:05 pm

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Twice in the past century Germans have learnt, the hard way, the value of sound money. Between 1921 and 1923 the Weimar Republic, under the strain of massive WW1 reparations, fell into a hyper-inflationary death spiral. The Mark plunged in value, measured against Gold Standard Marks it fell from a ratio of 1:1 to 1:1 trillion in 2 years. After the German defeat in WW2, their economy was in tatters and the Reichsmark once again worthless. In 1948 Ludwig Erhard, …