Tag Archives: Eurozone

Hard truths about the eurozone crisis

There has been little honest reflection within the European Commission about the eurozone crisis. Until now.
By Adam Tooze – It is not often one finds European officials quoting significant moments from pop culture, let alone an outgoing director-general for economic and financial affairs—the European Commission’s most senior economics official—quoting Ridley Scott’s Blade Runner. But that is how Marco Buti introduces a recent piece summing up his period in office between 2008 and 2019.

Buti’s contribution is significant as personal reflection but also because it raises the more general question of how the EU and its institutions will commemorate the tenth anniversary of the eurozone crisis.

When it came to revisiting the global financial crisis, Brussels did not hold back. In August 2017, to mark the tenth anniversary of its onset, the commission issued a statement blaming the spillover to Europe on the United States and giving itself credit for prompt action to stave off the worst. The press release was however issued on August 9th—anniversary of the failure of the French bank Paribas’ US property funds.

Subprime and Lehman could be safely blamed on the US. What, however, will the European institutions make of the ten-year anniversary of the eurozone crisis and its various phases between 2010 and 2015?

Last year, addressing the European Parliament on the 20th anniversary of the introduction of the euro, the then commission president, Jean-Claude Juncker, admitted there had been a lack of solidarity with Greece. He acknowledged there had been ‘reckless austerity’ (l’austérité irréfléchie). But he had the gall to suggest that the commission had succumbed to the influence of the International Monetary Fund, as though the agenda of austerity and ‘structural reform’ had been imposed from outside.

The traumatic history of the last ten years deserves better. more>

Preventing the Next Eurozone Crisis Starts Now

By Jean Pisani-Ferry – European leaders have devoted scant attention to the future of the eurozone since July 2012, when Mario Draghi, the European Central Bank’s president, famously committed to do “whatever it takes” to save the common currency.

For more than four years, they have essentially subcontracted the eurozone’s stability and integrity to the central bankers. But, while the ECB has performed the job skillfully, this quiet, convenient arrangement is coming to an end, because no central bank can solve political or constitutional conundrums.

Europe’s heads of state and government would be wise to start over and consider options for the eurozone’s future, rather than letting circumstances decide for them.

So far, Europe’s leaders have had little appetite for such a discussion.

The eurozone still lacks a common fiscal mechanism, and Germany has flatly rejected the European Commission’s recent attempt to promote a “positive stance” in countries with room to boost spending. Of course, when the next recession hits, fiscal stability is likely to be in dangerously short supply.

Finally, the governance of the eurozone remains excessively cumbersome and technocratic. Most ministers, not to mention legislators, appear to have become lost in a procedural morass. more> https://goo.gl/CsBcAJ

Brexit will hurt the UK. But it could save the European Union.

By Timothy B. Lee – Unsurprisingly, the Brits have looked at the shambles the euro had made of the rest of Europe and vowed never to adopt the common currency.

But the rest of the EU is in a pickle, because it’s extremely difficult to leave the currency once you’ve joined it. Greece discovered this the hard way during last year’s financial crisis.

What the eurozone needs, then, is to develop the economic institutions that can make the euro work well as a shared currency.

In other words, the EU needs to transform itself from a loose confederation of governments — akin to America’s Articles of Confederation — into a proper government with the full powers of a sovereign state.

One of the biggest problems with this plan was that the British had no interest in participating. And because they had refused to join the eurozone, they had little skin in the game and felt no particular urgency about it.

At the same time, it would have been extremely awkward for the eurozone to try to integrate without Britain. more> http://goo.gl/UaT5bZ


Germany’s record trade surplus is a bigger threat to euro than Greece

By Ambrose Evans-Pritchard – It is no mystery why the imbalance is getting worse. The German regulatory and tax structure is geared in favor of output and exports, and against consumption. It is the mirror image of Britain. Neither formula is healthy.

German surpluses did not matter in the days of the D-Mark.

The country revalued from time to time, correcting the problem. How Germany ran its own internal affairs were largely its own business.

But as the IMF has repeatedly stated, it is an entirely different matter in a monetary union. The German surplus lies at the root of EMU’s North-South divide. more> http://tinyurl.com/l6j9yz4


Eurozone crisis is just getting started

By Jeremy Warner – Virtually all successful currency unions start with political union, and then proceed through shared insurance, institutions, and fiscal arrangements to a common form of exchange.

Europe, it hardly needs saying, is trying to do it the other way round; it has forced monetary union on an unsuspecting public, and now, via the resulting financial crisis, hopes to bulldoze through the shared fiscal and political arrangements that might eventually make it work, culminating ultimately in a United States of Europe.

The arrogance of political leaders who think they know better may have been tolerable as long as Europe was growing. But today they deliver only economic ruin, making their position, and the legitimacy of the EU project, ever more vulnerable. more> http://tinyurl.com/k8lnfh4

The systemic nature of the Eurozone crisis

By Jorgo Chatzimarkakis Mark Esposito – The Eurozone has entered its fourth year of crisis. Member states have been falling into debt so severe, they have had to request bailouts tied to crippling austerity measures. Instead of providing some relief, these measures are only making matters worse. Like dominoes, successive member states find themselves on a negative economic watch. Living conditions have deteriorated and unemployment rates are skyrocketing.

This clearly shows that the steps taken by European leaders to address the euro crisis have not worked; instead, they are putting the European Union itself in danger. Instead of addressing core systemic problems, the EU has been defending its policies both within and outside of its borders. more> http://tinyurl.com/kqc7olq


Sour on Europe

By Robert Kahn – Today’s (May 15) Eurozone GDP numbers remind us that Europe remains in a grinding recession; a second-half recovery now looks to be a long shot at best.  The only bright spot comes elsewhere, with news of  a German labor deal that will raise engineering wages by nearly 6 percent over the next 20 months (rebalancing European demand and stimulating German consumption needs more of this).

Notably, the need for jobs dominates other issues on the economic agenda. The mood is particularly bleak in the periphery, reflecting those countries’ economic troubles. more> http://tinyurl.com/bsglppy


German role in steering euro crisis could lead to disaster, warns expert

By Ian Traynor – Jürgen Habermas, the Frankfurt professor whose political thinking has helped shape Germany over the past 50 years, called for the EU to be turned into a supranational democracy and the eurozone to become a fully fledged political union, while lambasting the “technocratic” handling of the crisis by Brussels and European leaders.

“The German government holds the key to the fate of the European Union in its hands. The main question is whether Germany is not only in a position to take the initiative, but also whether it could have an interest in doing so,” he said. more> http://tinyurl.com/cjnf8ke

Europeans Are Thinking the Unthinkable: That Debt Defaults Might Make Sense

By Michael Sivy – None of the euro zone‘s problems have gone away. Political crises beset France, Italy and Spain. Smaller countries, from Portugal to Cyprus, face even more pressing financial troubles. Germany grows less and less willing to foot the bill for bailouts.

There is, in fact, a historical case for tolerating default. Argentina suffered a financial crisis in 1999 that led to a period of high unemployment… more> http://tinyurl.com/c5rfxh3

Russia after Cyprus: Bringing the money home

By William E. Pomeranz – The Kremlin’e2’80’99s initial outrage over developments in Cyprus ‘e2’80ldblquote and the island’e2’80’99s shocking expropriation of billions of dollars held by Russian companies and citizens ‘e2’80ldblquote has given way to mild indifference. ‘e2’80’9cIf somebody gets caught and loses money at the two largest [Cypriot] banks, it’e2’80’99s a shame,’e2’80’9d First Deputy Prime Minister Igor Shuvalov recently stated, ‘e2’80’9cbut the Russian government isn’e2’80’99t going to do anything about it.’e2’80’9dpar
It turns out that the European Union settlement that left Cyprus’e2’80’99s banking sector in shambles has done Moscow a big favor. Not only did the EU take down a major offshore banking center, it helped President Vladimir Putin’e2’80’99s campaign to return to Russia any money stashed away in offshore bank accounts. more> http://tinyurl.com/d3rzv2h