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När och hur spricker EMU?

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Alla valutaunioner i historien har antingen lett till en stat eller spruckit.
Varför skulle EMU vara så annorlunda?
Anders Lindberg, Hässelby, SvD Synpunkt 14/8 2003



Jean-Claude Juncker’s Roadmap for European Disaster
Hans-Wernet Sinn, ProjectSyndicate 19 September 2017

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The institutional changes recommended by euro-area elites will likely exacerbate global imbalances.
Matthew C Klein, FT Alphaville 8 November 2017

As national currencies were replaced by the single currency, investors came to believe that devaluation risk had been eliminated.
They were narrowly correct, but didn’t anticipate that exchange-rate volatility had simply been replaced by larger fluctuations in nominal incomes and greater risk of default.

One of the interesting ideas we discussed was the “re-nationalisation of fiscal policy”.
In exchange for accepting German plans for a European Monetary Fund, which would only provide emergency lending after private creditors are forced to take large losses,
elected governments would have more freedom to tax and spend.

Treaty-based deficit rules would be replaced by market discipline.

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Europe Needs More Than a Bundle of Bonds
The new “safe asset” proposed by Brussels doesn’t solve the euro zone’s problem.
Bloomberg editorial 5 June 2017


The European Financial Stability Facility and
the European Stability Mechanism will raise a combined €61.5bn (600 miljarder kr)

in financing this year
FT 1 June 2017

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ECB’s Coeure calls for clarity on Greece debt relief before QE inclusion
Mehreen Khan, FT 31 May 2017



ECB faces impossible choice between German overheating or Italian debt storm
When ECB runs out of plausible justifications for why it is still covering Italy's entire budget deficit
and rolling over its existing €2.2 trillion of public debt.
Ambrose, 25 May 2017


Emmanuel Macron and the battle for the eurozone
Would such a federal agenda work? The answer is that, even if it were achievable,
it would be neither a sufficient nor a necessary solution.

Martin Wolf, FT 16 May 2017


Beleaguered pessimists of the eurozone, searching for the next threat on the horizon,
have settled on Italy as the likeliest source of doom, or at least disorder.
Weaker banks struggle with consequences of a long recession and loose lending
FT 11 May 2017


A group of leading economists and thinkers for the Jacques Delors Institute warned in a seminal report last year that EMU states will have to accept a supra-national system with a pooling of debts - anathema to the creditor bloc of Germany, Finland, Holland and Austria.

“At some point in the future, Europe will be hit by a new economic crisis. We do not know whether this will be in six weeks, six months or six years. But in its current set-up the euro is unlikely to survive that coming crisis,” they said.

Ambrose Evans-Pritchard, 3 April 2017


Either political integration catches up with economic integration, or economic integration needs to be scaled back.
As long as this decision is evaded, the EU will remain dysfunctional.
Dani Rodrik, Project Syndicate 14 March 2017


Italy
Joblessness in the eurozone’s third largest economy crept up to 12 per cent
underscoring Italy’s long struggle with low growth and double-digit unemployment
Youth unemployment rose to 40.1 per cent.
FT 31 January 2017

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Most of us hoped never again to have to pay attention to spreads between the bonds of different countries that share the same currency.
The fact that they are moving suggests that the existence of the euro might again be called into serious question.
John Authers, FT 31 January 2017

It seems appropriate to repeat the petunias comment today, because once again it seems we need to start worrying about Greece, and about peripheral European bond spreads.

For those uninitiated in The Hitchhiker’s Guide to the Galaxy, the only recorded thoughts of a bowl of petunias as it suddenly came into being and started to hurtle towards the ground were “Oh no, not again!”.

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Populists threaten EU break-up
"the largest civilisation project of the 20th century,
namely the European Union, could fall apart”
Sigmar Gabriel, Angela Merkel’s deputy chancellor, FT 26 January 2017

“After Brexit last year, if enemies of Europe manage again in the Netherlands or in France to get results
then we face the threat that the largest civilisation project of the 20th century, namely the European Union, could fall apart,”

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The European Stability Mechanism gave the green light to a series of modest measures
that will cut Greece’s 180 per cent debt-to-GDP ratio by 20 percentage points over the next 47 years.
FT 23 January 2017


Policymakers seem to think the European project will be safe
if the mainstream political leaders can survive the next 12 months.

Stephanie Flanders, chief market strategist for Europe at JPMorgan Asset Management, FT 8 January 2017

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Mr Macron is the opposite of a souverainiste:
he wants a fiscal and political union for the eurozone because he recognises that the only nation state that benefits from the current political arrangements in Europe is Germany, not France. In that sense, he is the polar opposite of Marine Le Pen, leader of the rightwing National Front.
Mr Macron wants to make the eurozone work; Ms Le Pen wants to destroy it.
Wolfgang Münchau, FT 1 January 2017


Remarkably, real domestic demand in the eurozone was 1.1 per cent lower
in the second quarter of 2016 than it had been in the first quarter of 2008.
This extreme weakness of demand should not have happened. It represents a huge failure.
Martin Wolf, FT 6 December 2016

So long as the eurozone fails to deliver widely shared prosperity,
it will be vulnerable to political and economic shocks.

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Martin Wolf at IntCom

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It was, said a hoarse, red-eyed Matteo Renzi, an “extraordinarily clear” result.
Official figures showed the rejectionist front winning by 60% to 40% in metropolitan Italy
(and by 59% to 41% counting ballots cast by Italians abroad).
The Economist, 5 December 2016


Britain’s decision to leave is the most striking but, in the long run,
the unfolding crisis in Italy could pose a more severe threat to the survival of the EU.
The reasons for this are political, economic and even geographic.
Gideon Rachman, FT 5 December 2016

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The Retreat from Hyper-Globalization
Flows of Goods and Services, People and Capital Have Overwhelmed the Ability of Political Processes to Accommodate Them
Remember: you can have (1) deep economic and financial integration, (2) an autonomous nation-state and
(3) responsive, representative government — two out of three.
WTF?, November 2016

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Factor-price equalization - Faktorprisutjämning


How December 4th Could Trigger The "Most Violent Economic Shock In History"
Italy has had no productive growth since 1999. Real GDP per person is smaller than it was at the turn of the century.
That’s almost two decades of economic stagnation. By any measure, the Italian economy is in a deep depression.
It’s no surprise Italians are in a revolutionary mood...
zerohedge 2 December 2016


Spreads on Italian bonds have widened to about 200 basis points over German bunds.
The balance-of-payments crisis underway since the first half of 2016 is the main factor
Carmen Reinhart, Project Syndicate 23 November 2016


The Eurozone desperately needs to strengthen its institutions relative to nation states,
develop procedures for managing sovereign insolvency, and impose loss sharing on official as well as private sector creditors.

But since these reforms would not serve the interests of creditor countries, it seems unlikely that they will ever happen.

Eventually, therefore, the Euro is likely to fail.
Coppola, 8 June 2016

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Italy is preparing a €40bn rescue of its financial system as bank shares collapse on the Milan bourse
An Italian government task force is watching events hour by hour, pledging all steps necessary to ensure the stability of the banks.
“This is the moment of truth we have all been waiting for a long time. We just didn’t know it would be Brexit that set the elephant loose,”
said a top Italian banker.
Ambrose Evans-Pritchard, Telegraph 27 June 2016



Brexit vote might drive the rest of the EU member states towards decisions they should have taken 10 years ago,
such as the establishment of a fiscal union and a proper banking union.
Wolfgang Münchau, FT 24 June 2016


“I’d never believed in the efficient market hypothesis or the rational expectation hypothesis.
But I’d forgotten that banks create credit, money and purchasing power and that they can create too much.
But once you return to the fundamentals, you realise that it’s very dangerous to construct a currency union that doesn’t have enough of a political union to make it work.”

Should they dismantle the eurozone?
“Break-up would create major disruption,” he replies.
“I still hope it will stay together and go down the required federalisation route.
But, if it doesn’t, then maybe it should break up.”

Adair Turner, Martin Wolf FT Lunch June 2016

Robert Lucas and all that

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I hate to say it, but I fear that we are in for a new round of euro zone troubles.
The Market Monetarist, Lars Christensen, 11 April 2016

Continued very low level of inflation expectations in the euro zone.
Hence, it is clear that the markets do not expect the ECB to deliver 2% inflation any time soon.

As a consequence, nominal GDP growth also remains very weak across the euro zone.
And with weak nominal GDP growth public finance concerns are again returning to the euro zone.

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Germany should leave the euro zone in order to save the union,
former Bank of England Governor Mervyn King, CNBC 21 March 2016


Bara en person. Angela Merkel.
EU skulle skapa fred på Balkan genom att göra de forna jugoslaviska staterna till en del av gemenskapen.
I dag är det i stället EU som ”balkaniseras”.
Den enda som kan stoppa sönderfallet är Tysklands förbundskansler Angela Merkel
Rolf Gustavsson, SvD 9 mars 2016

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Mervyn King: the eurozone is doomed
Telegraph 29 Febr 2016

The eurozone is doomed to fail and will lurch from crisis to crisis unless it is broken up, according to the former governor of the Bank of England.

In his new book, Lord King claims that steps towards fiscal union will not quell tensions in the 19-nation bloc and could even tear it apart.

He warns of a looming “economic [and] political crisis” triggered by endless bail-outs, austerity demands and pressure from the “elites in Europe” and the US to create “a transfer union” to solve the eurozone’s woes

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The rout in European financial markets last week was a wat­ershed event.
Münchau via Rolf Englund blog 16 Febr 2016


Donald Tusk, the president of the European council,
warned that positions were hardening on Britain’s future in Europe
and the risk of break-up was real.
Guardian 15 Febr 2016

David Cameron scrapped a debate at the European parliament on Tuesday and scheduled a meeting with Jean-Claude Juncker, president of the European commission, amid fears that a proposed settlement geared to keeping the UK in the EU could unravel because of growing European objections to the concessions promised to Britain.

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Europe’s leaders find solutions that are temporary, barely satisfactory and designed chiefly
to serve the purpose of somehow keeping the EU show on the road.

Like the Holy Roman Empire the EU may not disintegrate but slip into a glacial decline
Tony Barber, Europe Editor and Associate Editor, FT 21 December 2015

Whether it concerns terrorism, immigration, homegrown political extremism, the eurozone’s unity, unemployment, lacklustre economic growth or even Europe’s military defences,
national governments and the EU apparatus in Brussels look increasingly as if they are not up to the numerous challenges bearing down simultaneously from every direction.

Like Cavafy’s imaginary state, or like the Holy Roman Empire, which lasted for 1,000 years before Napoleon put it out of its misery in 1806,
the EU may not disintegrate but slip into a glacial decline, its political and bureaucratic elites continuing faithfully to observe the rites of a confederacy bereft of power and relevance.

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The EU did not collapse suddenly like the Roman empire.
Its decline was more like that of the Holy Roman Empire.

Extract from the Oxford History of Modern Europe, published in 2045,
Timothy Garton Ash, FT 18 December 2015

Early 2005 may be considered the apogee of what was then called the European project. The previous spring, 10 states of central and eastern Europe joined the EU, making it the largest commonwealth of liberal democracies in European history.

That union was proposing a constitutional treaty, popularly known as a “European constitution”. A single currency, the euro, appeared to be working well — and for many Europeans there was a sense of all-round optimism.
The outbreak of a pro-European Orange revolution in Ukraine convinced Russian president Vladimir Putin that the apparently soft, postmodern EU was a real threat to his power.

“The next decade, however, proved these to be grandiose illusions. A series of crises left European leaders reeling, starting with the rejection of the European constitution in referendums in France and the Netherlands, and continuing with a decade-long crisis of the eurozone, Russian annexation of parts of Ukraine, Islamist terror attacks, a British referendum on leaving the EU, millions of refugees fleeing the Middle East and Africa, as well as the growth of eurosceptic, anti-system and xenophobic parties across the continent.

“Unfortunately, the European leaders who gathered for one of their innumerable summits in Brussels in December 2015 failed to acknowledge the depth of the union’s existential crisis, let alone to find answers that effectively addressed the growing disillusionment of their peoples

The EU did not collapse suddenly like the Roman empire, with barbarian hordes occupying the bureaucratic palaces of Brussels. Its decline was more like that of the Holy Roman Empire.

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Timothy Garton Ash Home page

Rome, Habsburg and the European Union

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Unworkable and unreformable, the euro surely cannot survive another serious downturn
The euro in its present form will die not of the financial traumas that first threatened its existence, but of popular anger
Jeremy Warner, Telegraph 18 August 2015


I vastly overestimated the risk of /Euro/ breakup, because I got the political economy wrong
— I did not realize just how willing euro elites would be to impose vast suffering in the name of staying in.
Relatedly, I didn’t realize how easy it would be to spin a modest upturn after years of horror as success.
Paul Krugman, NYT 10 June 2015

I’m sorry to say that I completely missed the important of liquidity and cash shortages in driving bond prices in the euro area.
It wasn’t until Paul DeGrauwe weighed in that I realized just how much difference it would make if the ECB did its job as lender of last resort;
if the euro survives, DeGrauwe — and this guy named Draghi, who put his ideas into practice — should get a lot of the credit.

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If Europe cannot bend it will break
Germany’s tough approach is based on a realistic assessment of how hard it will be to get reforms through a 28-member EU
— as well as a profound aversion to rolling back the process of EU integration.
But it is also an alarming commentary on Europe’s inability to respond to changed circumstances, whether it is a 25 per cent shrinkage in the Greek economy,
or the unanticipated migration of millions of people across the EU.
Gideon Rachman, FT 8 June 2015

That failure to be flexible about change is dangerous. A Europe that cannot bend is much more likely to break.

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Gideon Rachman at IntCom

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There will be no serious adjustments of policy, since it will just be too hard to agree what to do.
That kind of complacency is Europe’s default reaction to political revolts from the unenlightened masses, otherwise known as voters.
Gideon Rachman, FT May 26, 2014


“The decision to use the single currency to drive the European project forward was a risky one,
and at some stage or probably in several stages, it will be necessary to put the missing fiscal framework into place,
Stanley Fischer, the vice-chairman of the Fed, FT 21 May 2015

Mr Fischer quoted EU founding father Jean Monnet in arguing that the history of Europe would be “forged in crises”.
The responses by the European Central Bank in recent years, plus the creation of a Banking Union, were examples of this principle in action, he argued.

“All that has been done so far makes it very likely that EMU — the Economic and Monetary Union — will survive this crisis,” Mr Fischer said.

Full text at FT

Full text at Fed

Federalism

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Policy makers in Italy, Portugal and Spain say their economies and financial systems are strong enough to survive a Greek departure from the eurozone,
but they acknowledge that Grexit might set a precedent replete with risks for Europe’s 60-year-old integration project.
FT 8 april 2015

On the other hand, a Grexit that was carefully managed and led to economic recovery in Greece, albeit after five to 10 years,
might strengthen populist parties such as Italy’s Northern League and Five-Star Movement,
which contend that eurozone membership has been little short of a national economic disaster.

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A Greek departure from the eurozone would still be "negative",
but that he believed it would be less damaging now because financial markets were much more confident than they had been in recent years.
However, he added that a "Grexit" would still leave the idea of monetary union in doubt. "It breaks a taboo and sets a precedent," he said.
Former European Commission president Jose Manuel Barroso, BBC 2 April 2015

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Accidental exit from the eurozone is quite likely — not because Greece or its partners want it
Exit would transform the eurozone from an irrevocable currency union into a regime of hard exchange-rate pegs.
That would be the worst of both worlds: neither as credible as a union nor as flexible as floating rates.

Martin Wolf, FT 31 March 2015

A country is most likely to leave the euro if its government cannot meet its obligations, its banks close their doors, its economy is depressed and its politics are turbulent. Greece might soon be in this state. A chaotic exit may then occur. It is vital to avoid such a “Greccident”.

Moreover, exit — particularly if unassisted — could cause grave economic and geopolitical consequences. Greece might plunge into an economic abyss. Abandoned by Europe, it might turn towards unfriendly powers. This would be a strategic disaster. Finally, Greece has already suffered the pains of austerity. From now on, things should get better, provided policy improves.

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Grekland

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To save the euro, let Greece go
... negotiations will continue until the last minute and concessions on the Greek side may enable the eurozone leaders to “extend and pretend” one more time.
DeAnne Julius, former member of the Monetary Policy Committee of the Bank of England, FT blog 31 March 2015

But, if so, this will not be the final act.

The unfolding drama has exposed the fundamental weakness of imposing a common currency on such disparate societies
without the central mechanisms either to enforce constraints on budget deficits or to trigger large inter-country subsidies.

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Fundamental misalignments that have made life so unbearable for many Europeans.
Imbalances tend to arise in economic life. There is nothing wrong with them in principle as long as they disappear eventually.
But there is no sign of a benign route out of the eurozone’s internal imbalances.
Wolfgang Münchau, FT 29 March 2015

Germany had a surplus of 7.5 per cent of its economic output last year.
Greece is running a current account deficit despite one of the most brutal economic adjustments in modern history.

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Interndevalvering

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Sustaining the Unsustainable Eurozone
When the eurozone was established, its creators envisioned gradual progress toward an “optimal currency area,”
characterized by fiscal integration, the free movement of labor, and political union. But this process has not occurred
Yannos Papantoniou, Greece’s Economy and Finance Minister from 1994 to 2001, Project Syndicate 25 March 2015

But this process has not occurred, and, as the interminable Greek crisis has shown, the eurozone remains rife with structural weaknesses and extremely vulnerable to internal shocks. This is clearly not sustainable.

Despite efforts to promote fiscal-policy coordination, eurozone members’ budgets still fall under the purview of separate national authorities, and northern Europeans continue to oppose transfers from more to less prosperous countries beyond the very limited allowance of the European Union’s regional funds.

Moreover, labor mobility is severely constrained by linguistic and cultural barriers, as well as administrative bottlenecks.

And “ever-closer” political union has ceased to attract public support – if it ever did – and is thus not feasible today.

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Federalism

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It is a sign of low expectations in the handling of the Greek debt crisis
when a deal to keep the country from chaos for four months at the most and only 72 hours at the least
is hailed as a great breakthrough.
FT View 22 February 2015


In theory the euro is forever. That is what all the law associated with it says.
And once it is not forever for Greece, it is not forever for any nation, even Germany.
Robert Peston, BBC economics editor, 17 February 2015

Whether Berlin likes it or not, the moment Greece leaves, those who control the world's huge pools of liquidity or cash
will start placing bets on the next country to head for the exit.
Once that happens, eurozone fragmentation is almost impossible to reverse

Berlin, Paris and the rest simply cannot be confident the euro will be for all time if Greece is either bundled out the exit door or chooses to walk through it.
Because it would demonstrate that the euro had failed in its core underlying purpose,
which was to bind its members ever closer together, economically, financially and - perhaps critically - in a political sense too.

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"ever closer union" - The United States of Europe

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The banks in Greece will not open on Monday, I guess
Rolf Englund, 14 February 2015


The euro is engaged in two dances of death.
The fact that both /ECB and Greece/ threaten euro destruction is testament to the astonishing mis-construction of the euro itself.
Peter Doyle, an economist and former IMF staffer, FT 10 February 2015
Highly Recommended

The risks of mutual misreading between Merkel and the markets on this are potentially catastrophic.
If she wrongly finds affirmation from markets’ quiescence that defenses are strong enough to withstand Grexit and so lets Greece go,
but markets’ quietude actually reflects QE and their belief that she will again crumble, bang goes the euro.
Peter Doyle, an economist and former IMF staffer, FT 10 February 2015


ECB; expansion of so-called Emergency Liquidity Assistance by about 5 billion euros to Greece on Thursday
Bloomberg, Friday 13th 2015


The real risk for the eurozone is that Greek default and euro departure go relatively well
Roger Bootle, Telegraph 11 Jan 2015, via Rolf Englund blog


The spectre of Greece's exit from the single currency - or "Grexit" - once again.
Eurozone policymakers have consistently ruled out that possibility because they are wary of opening Pandora's box.
Linda Yueh, BBC Chief business correspondent, 29 December 2014


Snap elections in Greece open the way for an anti-austerity government
and a cathartic showdown over the terms of euro membership.
Yields on 3-year Greek debt surged 185 basis points to 11.9pc
Ambrose Evans-Pritchard, 29 Dec 2014


Eurozone’s weakest link is the voters
The euro crisis is back.
The rise of anti-system parties threatens a currency that depends on consensus
Gideon Rachman, FT December 29, 2014


Secular stagnation
Eurozone policy makers face three choices.
First, they can transform the eurozone into a political union, and do whatever it takes:
a eurobond, a small fiscal union, transfer mechanisms and a banking union worthy of its name.
Second, they can accept secular stagnation.
The final choice is a break-up of the eurozone.
Wolfgang Münchau, FT October 19, 2014

The second and third choices are not mutually exclusive. As the political union is firmly off the table, this leaves us with a choice between depression and failure – or both in succession.

Financial markets have woken up to the possibility of a eurozone-wide economic depression with very low inflation over the next 10 to 20 years.
The implications for those who live in such an economic snake pit are already visible: high unemployment; rising poverty; real and nominal wage stagnation; a debt burden that will not come down in real terms; a decline in public sector services, and in public investment.
A shocking example is the decrepit state of German military hardware. Of the Luftwaffe’s 254 fighter planes, 150 cannot fly.

Secular stagnation – the idea that a chronic shortfall of investment might produce a long period of weak demand – also has disturbing implications for financial investors.
The recent high levels of equity prices were premised on the best possible of all scenarios:
that productivity growth rates would revert to historical averages, and that the level of gross domestic product would eventually catch up with the pre-crisis economic growth trajectory.
Investors have now begun to realise that neither is going to happen. GDP is still only close to the levels of 2007.

Eurozone policy makers face three choices.

First, they can transform the eurozone into a political union, and do whatever it takes: a eurobond, a small fiscal union, transfer mechanisms and a banking union worthy of its name.

Second, they can accept secular stagnation.

The final choice is a break-up of the eurozone.

The second and third choices are not mutually exclusive. As the political union is firmly off the table, this leaves us with a choice between depression and failure – or both in succession.

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Secular Stagnation

Defiant France ignores the abyss
There is the argument in government ministries and the smoke-free conference rooms of Brussels,
as politicians and bureaucrats attempt to define new continent-wide rules to ensure Europe does not slip back into a new and debilitating debt crisis.
But the future of the European economy and its single currency is more likely to be decided on the streets.
Gideon Rachman, FT October 18 2010


Borders and budgets risks provoking political crises
that could plausibly culminate in the break-up of the euro, or even the EU.

Gideon Rachman, FT October 20, 2014


How the euro was saved
In the French seaside resort of Cannes
To the astonishment of almost everyone in the room, Angela Merkel began to cry.
the man sitting next to her, French President Nicolas Sarkozy, and the other across the table, US President Barack Obama
Peter Spiegel, Financial Times 11 May 2014



Der Spiegel


Unbalanced and unsustainable – if something cannot go on forever, then it will stop
If something cannot go on for ever, Herb Stein, one time economic adviser to President Richard Nixon, famously remarked, it will stop.
Yet sometimes, it seems to take an awfully long time to grind to a halt.
Jeremy Warner, Telegraph, August 15th, 2013

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/RE: If something cannot go on for ever it will stop. The Public Interest - nr 97 Fall 1989/ and http://en.wikiquote.org/wiki/Herbert_Stein/


Eurointelligence puff:
From the man who single-handedly invented the whole concept of economic commentary in newspapers
comes a very clear-sighted column on why he thinks the eurozone will ultimately collapse

If something cannot go on for ever it will stop.
Why the eurozone will come apart sooner or later
The single currency has failed to become the harmonising force that it was supposed to be
Samuel Brittan, Financial Times, August 8, 2013

Since the euro was inaugurated in 1999, German unit labour costs have risen by less than a cumulative 13 per cent. During this time, Greek, Spanish and Portuguese labour costs have risen by 20 to 30 per cent, and Italian ones by even more.

It is hardly surprising that Germany has a current account surplus of 6 per cent of gross domestic product

The economic theory – such as there was – behind the creation of the euro was that the single currency itself, and the supposed impossibility of devaluation by members, would act as a harmonising force.

But this has not happened and present relationships have become unsustainable.

Herbert Stein, an economist active in Washington towards the end of the last century, said that if a policy or situation was unsustainable, it would not be sustained. But he did not indicate how long it would take for such situations to unravel.

/RE: If something cannot go on for ever it will stop. The Public Interest - nr 97 Fall 1989/ and http://en.wikiquote.org/wiki/Herbert_Stein/

Meanwhile, it is in the interests of the eurocrats to make the problems seem as complicated as possible so that only a small number of so-called financial experts can even discuss them; and we have had one financial package after another and one guarantee after another to keep the structure going.

But loans and guarantees do not make the unsustainable sustainable.

There is only a limited number of ways that the situation could develop.

First, “austerity” in the peripheral countries could succeed.
By this, I mean the demand squeeze imposed on them results in a fall in costs and prices,
relative to their eurozone neighbours, leading to greater competitiveness,
an eventual recovery in living standards and a sharp drop in unemployment.

/Interndevalvering (Ådals-metoden)/

Second, the peripherals could continue to stagnate. Unemployment is now 22 per cent in Greece, 24 per cent in Spain, 18 per cent in Portugal, 15 per cent in Ireland and 10 per cent in Italy.

The third option is unlikely, but included for completeness. Germany and other northern euro members could pursue more “expansionary” (read inflationary) policies, thus reducing the agony of the south. Alternatively it could continue to subsidise the peripherals indefinitely.

The fourth option is for one or more of the peripherals to leave the eurozone. If I had to bet (which I don’t), my money would be on number 4. But I would not bet at all on when it will occur.

The Holy Roman Empire was founded by Charlemagne in 800 and lasted until it was dissolved by Napoleon in 1806.

The timescale of euro disintegration is anyone’s guess.

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More by Samuel Brittan at Financial Times

More by Samuel Brittan at IntCom and nejtillemu.com

Rome, Habsburg and the European Union

EMU Startpage

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This month marks the fourth anniversary of the May 2010 financial rescue of Greece.
Clearly, the supposed experts who predicted the imminent disintegration of the eurozone have been proved wrong.
But it is equally likely that those now declaring that the crisis is over will be proved wrong as well.
Barry Eichengreen, Project Syndicate, 12 May 2014

Ireland, Portugal, Spain, and Greece have made considerable progress in lowering their unit labor costs to 1999 levels relative to Germany.
The problem is that 1999 levels are not enough, because producers now have China and other emerging markets with which to contend.

Italy and France, meanwhile, have made considerably less progress on improving their international competitiveness.

Europe’s banking crisis is unresolved. Loans to finance fixed investment continue to fall.

Remarkably, the European Banking Authority’s latest stress test for the eurozone’s banks does not contemplate the possibility of deflation in its adverse scenario.

Europe’s much vaunted banking union harmonizes deposit-insurance coverage but does not provide a common deposit-insurance fund.

The associated resolution fund will possess only € 55 billion of its own capital, whereas European bank liabilities are on the order of € 1 trillion.

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The longer the crisis in the Eurozone drags on,
the more it looks like the “Lost Decade” in Latin America in the 1980s
than the “Phoenix Miracle” of the East Asian countries following their crisis in the 1990s.
Barry Eichengreen, Naeun Jung, Stephen Moch, and Ashoka Mody, Berkeley, May 2013

In Latin America it took nine years for growth to recover sustainably to the levels prevailing prior to the crisis in 1982.
The meantime saw a grinding process of internal adjustment characterized by debt overhang rather than debt reduction.

East Asia’s crisis, in contrast, took the form of a v-shaped recession and recovery, with growth falling sharply in 1998, the year following the onset of the crisis, but recovering equally sharply in 1999 to levels nearly as high as before the crisis.
The growth of debts was more limited, and exports increased dramatically. Internal and external adjustment was faster.

Thanks Eurointelligence and Brad Delong for the link.

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Rolf Englund, Den Stora bankkraschen, Timbro, 1983

Internationella valutafondens roll i krishantering: fallet Asien
För oss från Norden var det dock uppenbart redan i ett relativt tidigt skede av krisen i Asien att
det fanns flera likheter med den bank- och finanskris vi upplevt i Sverige, liksom i Finland och Norge.
Låt oss här nämna tre punkter där vi anser att likheterna är de mest uppenbara.
Eva Srejber m fl, Ekonomisk Debatt nr 2/1999

http://www.internetional.se/evas299.htm#asien

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Since the European debt crisis broke out in 2009,
Greece, Ireland, Portugal, Spain and Cyprus have sought international emergency aid.
Pledges from the euro area and the International Monetary Fund have totaled 496 billion euros ($649 billion).
Bloomberg 7 May 2013

Full text

Kommentar av Rolf Englund:
OBS att detta är lån.
Man undrar hur dom tänker sig att Greece, Ireland, Portugal, Spain and Cyprus
skall kunna betala tillbaka pengarna 4.235 miljarder kronor


Förhoppningsvis går det att hitta hållbara vägar ur dagens djupa europeiska kris, men det blir inte lätt.
Annika Ström Melin, DN 18 april 2013


Det vi beskådar är inte eurons kris.
Ordet kris antyder något övergående, ljuset i tunneln kommer snart...
Det vi beskådar är eurons dödskamp.
Slutet kan bara bli ett.
Men varför skall miljoner människor lida för att Angela Merkel skall hinna bli omvald i september?
Rolf Englund 11 mars 2013


In the US, bank assets were close to 80 per cent of gross domestic product.
In the EU, they were 350 per cent.
EU has a banking sector that is not only too big to fail, but too big to save
Martin Wolf, Financial Times, 4 October 2012


The ECB is saying that it will seek to eliminate the threat of a break-up, except when this threat is most real,
which is. of course, precisely when the country is failing to meet policy conditions.

Martin Wolf, Financial Times 11 september 2012


Kommer Europa låta Bryssel ta över den ekonomiska makten eller läggs EMU-projektet ner?
Endera måste ske och det mesta talar för att Bryssel tar hem spelet.
Det lär vi i så fall få ångra i generationer framåt.

Resonerar man kring vad som är ”långsiktigt hållbart” så landar man lätt i slutsatsen att eurons dagar är räknade.
Det finns dock starkare krafter som talar för att EMU-länderna trots allt lär ge upp makten till Bryssel.
Etablissemanget vill det. Nästan alla etablerade partipolitiker kommer framstå som åsnor om EMU havererar.
Marknaden vill det. Finansiella marknader har nästan alltid ett kortsiktigt fokus och bryr sig inte om vad som är rättvist eller demokratiskt.
Lobbyisterna vill det. Hela banksektorn och tyska exportindustrin kämpar med alla medel för att euron ska överleva.
Peter Benson, SvD Näringsliv 21 juli 2012


"Lätt som en plätt"
Egentligen handlar eurokrisen om att Sydeuropa aldrig lyckats hålla jämna steg med konkurrenterna från Nordeuropa.
Så länge varje land hade sin egen valuta var det ingen tragik i detta.
Skillnaderna i produktivitetsutveckling kunde då regleras med att den tyska D-marken årligen förstärktes någon procent mot de svagare konkurrentländerna.
Med den breda penseln kan man måla upp två huvudscenarier för framtiden.
Dessa scenarier kallar jag ”Euron havererar” respektive ”Bryssel tar makten”.
Peter Benson, SvD Näringsliv 14 juli 2012


What is needed is a solution that is both politically feasible and economically workable
Not only to achieve agreement among governments responsible to national electorates, but also to obtain at least toleration of that agreement among those voters
Economic workability means offering electorates enough hope for the future to persuade them to elect leaders prepared to stick with membership of the eurozone
I no longer believe this could work
Martin Wolf, Financial Times 26 June 2012


Unsustainable and Disintegration
ECB president Mario Draghi described the current set-up of the eurozone as "unsustainable".
And EU economics commissioner Olli Rehn said more austerity was needed if the eurozone was to avoid disintegration.
BBC 31 May 2012

Full text


Euron kollapsar i Spanien
Rolf Englund 28 maj 2012


Martin Wolf: Would he conclude that the European currency union was a mistake?
Paul Krugman: “Yes, I think we’ve been asking, whose fault is this crisis?
And I think it was basically fated, from the day the Maastricht Treaty was signed.
Now, I think it might be rescuable with a higher inflation target, which is a poor second best to having a fiscal union.
But no, the setup is fundamentally not workable.
Financial Times 26 May 2012

Full text


A Greek exit from the euro area has the potential to be
EU’s most economically and politically destructive event of a generation
Bloomberg Opinon, Editors, May 16, 2012 1:00 AM GMT+0200

Full text


RE: The Ultimate Article about EMU and the Eurocrisis
Time to plan a velvet divorce for the euro
In the coming months, Europe may be forced to decide
Sacrificing national self-rule on the altar of the euro is inherently objectionable
– and would invite a nationalist backlash across Europe.

Gideon Rachman, Financial Times 21 May, 2012


Why the euro is doomed to fall apart:
it was an incredibly stupid idea in the first place

Tim Worstall, Senior Fellow at the Adam Smith Institute in London
Telegraph, 9 May 2012

Adam Smith Institute


The bottom line, as brilliantly explained in the European Economic Advisory Group's latest annual report,
is that it is a balance of payments crisis, pure and simple, which the eurozone lacks the adjustment mechanisms to deal with

Jeremy Warner, Daily Telegraph, March 16th, 2012



With Spain now front and center, the essential wrongness of the whole European policy focus becomes totally apparent.
Spain did not get into this crisis by being fiscally irresponsible; here’s a little comparison:

Paul Krugman, 7 March 2012


Events on the Continent have come to feel much like the drift into war.
There is a feeling of powerless inevitability about it.

Jeremy Warner, 1 Dec 2011


Is this really the end?
Unless Germany and the ECB move quickly, the single currency’s collapse is looming
The Economist print Nov 26th 2011



The greatest threat to the euro is that Greece will make a success of default and devaluation.
Suppose that once the new drachma has fallen by 30pc to 50pc, Greece begins to show signs of growth.
How would it then be possible to persuade the electorate of Spain, Portugal, Italy, and even Ireland, that there is no alternative to years of misery?
It is all very well building firewalls to stop financial contagion, but how do you build firewalls around the voters?
Roger Bootle, Daily Telegraph 26 February 2012


The Ticking Euro Bomb
The architects of the euro and their successors have lost the Maastricht Treaty bet.
They have jeopardized an agreement made by 12 countries in the hope that the markets wouldn't notice how fragile their shiny new currency really is.
Der Spiegel Staff, 7 October 2011
En lysans artikel - Highly recommended


a defining moment for Europe
I make no apologies for repeatedly taxing the reader with commentary on the future of the single currency,
for its crisis is without doubt the most important European story of the decade.
We are fast approaching a defining moment.
Jeremy Warner, Daily Telegraph 9 Dec 2010



What EU leaders once ruled out — a default by a euro-zone nation — has firmly entered the sphere of the possible
Top euro-zone politicians, engaged for months in a string of meetings that have failed to bring agreement on how to provide more aid to Greece, are trying furiously to stamp out the flames of contagion licking at Italy and Spain
Wall Street Journal 14 July 2011



Eurogruppens ledare Jean-Claude Junker och Jean-Claude Trichet, chef för den Europeiska Centralbanken ECB
SvD Näringsliv 13 juli 2011


Euron är "världens mest stabila valuta".
Eurogruppens ordförande Jean-Claude Juncker i en tidningsintervju på fredagen, rapporterar Bloomberg News.
DI 2011-01-03



Greece’s austerity plan looks doomed to fail.
It does too little to prevent the epic folly of Greece’s railways and other ruinous schemes.
It will screw down too hard on ordinary Greeks, with new taxes, spending cuts and a rushed privatisation scheme.
And it will almost certainly condemn Greece to recession, strife and an eventual debt default.
The Economist print June 30th 2011

“Events in Greece have brought the euro area to a crossroads:
the future character of European monetary union will be determined by the way in which this situation is handled.”
Jens Weidmann, Bundesbank president and European Central Bank governing council member, Hamburg, 20 May, 2011
Financial Times, Ralph Atkins, May 24 2011 22:35

It’s now clear that Greece, Ireland and Portugal can’t and won’t repay their debts in full, although Spain might manage to tough it out
Paul Krugman, New York Times, 22 May 2011


The eurozone's crisis in BBC graphics:
Click here


En omstrukturering kan innehålla olika typer av förändringar av villkoren i ett lån, men vanligtvis innebär det en nedskrivning av skuldernas värde.
Tekniskt sett är en omstrukturering lika med en betalningsinställelse.
Hittills har den officiella linjen från ledande EU-politiker och beslutsfattare varit att en omstrukturering inte är aktuell, även om de flesta räknar med att det bakom kulisserna dras upp planer på hur en sådan skulle se ut
Viktor Munkhammar DI 14/4 2011
Rolf Englund: Ett annat ord är Statsbankrutt.




raising the spectre of the "effective end of the euro area,"
The Economist Intelligence Unit has warned, 4 Apr 2011

Hoppet är ute för EMU - Euron kollapsar i Spanien
Rolf Englund blog 31/5 2010

Euron spricker när dollarn faller
Rolf Englund NWT 8/1 2001


'If the euro fails, then Europe fails,'
warned the German Chancellor Angela Merkel last night
DT Tuesday 16 November 2010 with nice pic


"Risken är att EU plötsligt ger upp andan"
Europeiska unionen är döende, skrev Charles Kupchan i en tankeväckande krönika i söndagens Washington Post.
Det finns tyvärr en del som tyder på att han har rätt.
Annika Ström Melin, Kolumn DN 1 september 2010


The futile attempt to save the eurozone
Samuel Brittan, FT November 4 2010

Otmar Issing, the former chief economist of the European Central Bank and the German Bundesbank,
is a genial number-cruncher who believes in the overall benefits of European integration
has turned virulently pessimistic over the European single currency.
In a marked change from his relative sanguinity during his eight years at the ECB,
he terms member countries’ unreliability on economic policies “a basic design flaw of monetary union.”
David Marsh, Market Watch, Jan. 10, 2011
Highly recommended


Euro's Collapse Is Not 'Unthinkable': Warren Buffett
CNBC, 24 March 2011


Det finns egentligen inte någon Eurokris.
Tvärtom tvingar euron fram reformer som sedan länge varit nödvändiga, vilket alltid har varit ett av de starkaste argumenten för en gemensam valuta.
Stefan Fölster, Magasinet Neo 2010-06-15

Stefan Fölster menar att en nedskrivning av Greklands skulder är oundviklig.
– Det är egentligen inte en Greklandskris utan en bankkris
Stefan Fölster intervjuad i Sv D Näringsliv 28 juni 2011


The eurozone is now subject to a generalised and full-blown run on its bond market,
as the crisis has now spread to France, Belgium and Austria.
Eurointelligence 16 November 2011

Italian spreads reached a horrendous 5.3% this morning, Spanish spreads are moving towards 5%, and French spreads, at 1.916%, are no longer at a level that this consistent with an AAA rating. Belgium’s spread has hit 3.2% this morning, and is now at a level of Italy and Spain a couple of months ago. Even Austria is now under attack, with spreads of 1.8% yesterday.

It was a day when global equity market plunged, amid fears that the eurozone crisis could throw the world economy into recession.



Traders said there were few buyers in many bond markets, with only the European Central Bank active in Italy and Spain.

“It is really scary,” said one at a US bank. “Everyone is liquidating in the eurozone bond markets ... Everyone is heading for the door.”


Origins of the Euro Crisis
The key point here is that countries within the euro zone have no policy tools
with which to manage their balance of payments

Paul Krugman, NYT September 23, 2011

Kash Mansori has an excellent post about the origins of the euro crisis. He documents the fact — which the Germans cannot bring themselves to acknowledge — that fiscal irresponsibility had very little to do with it.
And he shows that what really predicts who found themselves in crisis was capital inflows

Somewhere in the years just before the crisis I was at a meeting in Barcelona where Olivier Blanchard tried to tell the Spaniards how dangerous the situation was getting;
he got trashed and ridiculed for his pains, just like those who warned about the US housing bubble.

Full text

Olivier Blanchard, the IMF’s chief economist called for several bold innovations.
Central banks should raise their inflation targets—perhaps to 4% from the standard 2% or so.
The Economist print Feb 18th 2010

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News


Germany should leave the euro zone in order to save the union,
former Bank of England Governor Mervyn King, CNBC 21 March 2016


The euro is engaged in two dances of death.
The fact that both /ECB and Greece/ threaten euro destruction is testament to the astonishing mis-construction of the euro itself.
Peter Doyle, an economist and former IMF staffer, FT 10 February 2015
Highly Recommended

On the one hand, in an incredible reversal of practice during the global financial crisis—when central banks were at pains to conceal which institutions were receiving their emergency assistance for fear of compounding the adverse signals and therefore the crisis—
the ECB has brazenly publicized exactly which Greek banks depend on its help and how much. And it has overtly warned it would withdraw that help.
In this way, the central bank is overtly threatening to blow up the Greek banking system, in order to make the euro work.

On the other hand, Syriza would like nothing better now than to see the yields on Spanish, Portuguese, or Italian sovereign debt relative to Germany jump, signalling broader market disquiet— that Grexit may be imminent and that the rump eurozone would be badly destabilized by it—so forcing ECB retreat. So Syriza, in league with Podemos in Spain and prevailing anti-euro Italian political forces, is openly threatening to blow up its own exchange rate regime, the euro, in order to make it work.

The army of euro-philes and euroapologists including the IMF, casting themselves as what Krugman labels “Very Serious People” (VSPs), defended it as the best possible monetary-craft for Europe.

The risks of mutual misreading between Merkel and the markets on this are potentially catastrophic.
If she wrongly finds affirmation from markets’ quiescence that defenses are strong enough to withstand Grexit and so lets Greece go,
but markets’ quietude actually reflects QE and their belief that she will again crumble, bang goes the euro.

Full text

"After twenty years of service, I am ashamed to have had any association with the Fund at all,"
wrote Peter Doyle an ex-economist for the International Monetary Fund in a letter to the IMF's executive board
http://www.businessinsider.com/imf-economist-peter-doyle-letter-christine-lagarde-2012-7?op=1#ixzz3RdIizjIy


Some eurozone policy makers seem to be confident that a Greek exit from the euro, hard or soft,
will no longer pose a threat to the other periphery countries.

They might be right; then again, back in 2008, US policy makers thought that the collapse of one investment house, Bear Stearns,
had prepared markets for the bankruptcy of another, Lehman Brothers.
We know how that turned out.
Kenneth Rogoff, Project Syndicate, 2 February 2015


The euro is still vulnerable, and Greece is not the only problem
Even if the immediate threat of break-up has receded, the longer-term threat to the single currency has, if anything, increased.
The Economist, Dec 13th 2014 print

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Pamflett skriven av Joschka Fischer: Scheitert Europa? (Misslyckas Europa?).
Det europeiska samarbetet är på väg mot fiasko. EU-projektet har aldrig varit så hotat som i dag.
Finanskrisen aktualiserade de alltjämt olösta existentiella frågorna om EU:s mål och medel.
Det traditionellt tongivande samarbetet mellan Tyskland och Frankrike blockeras av att båda vägrar diskutera framtiden.
Rolf Gustavsson, SvD 23 november 2014


The euro is in greater peril today than at the height of the crisis
Insurrectional electorates more likely to vote for a new generation of leaders
Wolfgang Münchau, FT November 9, 2014


America’s experience in the 1960s should have warned the eurozone’s creators that tying national monetary authorities’ hands might not be such a good idea.
Europe’s leaders must recognize that the eurozone, as it is currently constituted, is larger than Europe’s optimal currency area.
Some of its member countries – certainly Greece, and probably Italy and Spain – need an independent monetary policy.
Koichi Hamada, Special Economic Adviser to Japanese Prime Minister Shinzo Abe and Professor of Economics at Yale University,Projet Syndicate 28 October 2014

That would not be the case if the eurozone operated according to Robert Mundell’s vision of an optimal currency area, with labor and capital adjustments replacing exchange-rate adjustment, and shocks being homogeneous (rather than asymmetric).

Moreover, Germany’s experience with reunification suggests that political union is integral to such a union’s success.

The eurozone’s performance has not met any of these criteria.

Full text


This parrot has ceased to be
Unlike Japan, which has a homogenous, stoic society, the euro area cannot hang together through years of economic sclerosis and falling prices.
As debt burdens soar from Italy to Greece, investors will take fright, populist politicians will gain ground,
and — sooner rather than later — the euro will collapse.
The Economist print, editorial, October 25th 2014

Full text

Youtube: This parrot is dead

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The future of the European economy and its single currency is more likely to be decided on the streets.
Gideon Rachman, FT October 18 2010

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Borders and budgets risks provoking political crises
that could plausibly culminate in the break-up of the euro, or even the EU.

Gideon Rachman, FT October 20, 2014


Remember Europe?
You know — the place with the common currency that almost fell apart two years ago because of trouble in Greece,
prolonged recession and fighting among political leaders over the best way out of the mess.
Until a few days ago, international investors seemed to have forgotten that there was ever anything wrong on the Continent,
as they lined up to buy bonds from Spain, Italy and even Greece
New York Times 16 October 2014

But the recent sell-off in global stock markets seems to have revived repressed memories.

Full texr

Greece

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News


Today, with the eurozone economy still flatlining five years after its crisis erupted,
the ECB inauguration of a two-year programme to nationalise loans to households and businesses
- to the tune of several hundred billions of euros - looks like a slightly desperate last role of the dice.

Some two or three years ago, the European Central Bank (ECB) would have been seen as revolutionary and courageous,
if it had then set about buying bank debt in the form of bonds, including junk from Greece and Cyprus.
Robert Peston, BBC economics editor 2 October 2014


Ilargi: Europe Is Crumbling Into Collapse
Yves Smith (naked capitalism) October 2, 2014
Highly Recommended

Yves here. The word “collapse” may seem overwrought when applied to Europe, but cold-blooded, clear eyed colleagues who have good connections and have spent a bit of time there recently say things that are broadly similar to Ilargi’s take.

Despite the conventional wisdom that the cost of a Eurozone breakup is catastrophically and thus will never take place, that confidence may prove to be the currency union’s undoing. Ideological rigidity about austerity is leading to policies that are crushing large swathes of the population.

And Europe, unlike the US, had enough of a tradition of popular revolt that that uprisings, either on the street or in the ballot box, are real possibilities, as the sudden rise of the anti-EU right shows.

Full text

Freden

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Draghi’s recent speech at the annual gathering of central bankers in Jackson Hole has excited great interest,
but the implication of his remarks is even more startling than many initially recognized.
If a eurozone breakup is to be avoided, escaping from continued recession will require increased fiscal deficits financed with ECB money.
The only question is how openly that reality will be admitted.
Adair Turner, former Chairman of the United Kingdom’s Financial Services Authority,
member of the UK’s Financial Policy Committee and the House of Lords, Project Syndicate 8 September 2014


Italy's Renzi must bring back the lira to end depression
Output has collapsed by 9.1pc from the peak, back to levels last seen 14 years ago. Industrial production is down to 1980 levels.
It takes spectacular policy errors to bring about such an outcome in a modern economy.
Ambrose Evans-Pritchard, 13 Aug 2014


The argument between Italy and Germany asks a question at the heart of the currency’s future
Can an arrangement that will always fall well short of a textbook monetary union
be at once economically robust and politically sustainable?

Philip Stephens, FT 10 July 2014

Italy, with the same eye on domestic politics, worries about political credibility. This rests on a resumption of growth.

Germany may be right to argue that a stable debt and deficit framework is a prerequisite for growth, but if markets conclude the remedy is killing the patient, then the whole system would lose credibility.

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Italien - Tyskland

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Ferdinando Giugliano?
Ferdinando Giugliano is the FT’s global economy news editor.
Unhappy Union: How the Euro Crisis – and Europe – Can be Fixed,
Book by John Peet and Anton La Guardia, journalists from The Economist.
Review by Ferdinando Giugliano, FT 6 July 2014
Rolf Englund blog 2014-07-07

As La Guardia and Peet argue, the eurozone’s politicians made
a serious conceptual mistake in confronting the turmoil that entangled Greece and the rest of the bloc’s periphery.

Full text

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Rolf Gustavsson i SvD 29 juni
den hittills överlägset bästa analysen

The Euro Crisis and Its Aftermath
Jean Pisani-Ferry

http://www.amazon.com/Euro-Crisis-Its-Aftermath-ebook

http://www.project-syndicate.org/columnist/jean-pisani-ferry

Jean Pisani-Ferry was the first Director of Bruegel from 2005-2013.
He is currently /June 2014/ the Commissioner-General of the French Prime Minister’s Policy Planning Staff in Paris and professor of economics with Hertie School of Governance

http://www.bruegel.org/about/person/view/27213-jean-pisani-ferry/

Jean Pisani-Ferry at Financial Times
http://blogs.ft.com/the-a-list/guest-author/jean-pisani-ferry/


We were asked: “What probability do you attach to Greece leaving the eurozone by the end of the year?”
He said 100%. I said 0%. This caused no little amusement in the audience. In the end, one of us was more right than the other.
What those forecasting the eurozone’s collapse overlooked was the commitment of elected officials and their constituents to the European project.
Along with this deep and abiding commitment to the European project, there is fear of the unknown.

Barry Eichengreen, Project Syndicate 11 September 2013

The consequences of abandoning the euro are highly uncertain, and few European leaders are willing to go there.
When push comes to shove, they are prepared to do just enough to hold the eurozone together, even if the necessary steps are economically and politically distasteful.

Full text

Barry Eichengreen


Many explanations have been proffered. Yes, the French and the British were protesting their ineffective establishment parties.
Yes, the European Parliament itself, with its halfhearted mandate and wasteful spending, isn’t an institution people care about.
Yes, the European elections have often been a vehicle for flaky protest votes.
And of course it’s true that the European Union itself has made terrible decisions in recent years,
including the creation of a currency union that devastated the economies of several of its members.

Anne Applebaum, Washington Post, May 31, 2014

Full text

Plus ca change, plus c'est la meme chose:
One of the most remarkable characteristics of the European Union is the ability of its leaders to keep building their institutions and expanding their power,
self-righteously ignoring whatever obstacles European voters throw in their path.

Anne Applebaum Washington Post 2/6 2005

EU-valet 2014


The results in France are infinitely the more important
– and not just because Ms Le Pen’s smile does not disguise the FN’s fascist and anti-semitic roots.
France, by contrast, is an essential pillar.
Without France, the euro and the entire European project would collapse in on themselves.
Philip Stephens FT May 29, 2014


I Malmö levererade Persson, våren 2011, som vanligt utan manus, precisa formuleringar som hade kunnat gå rakt till trycket.
Men framför allt sade han något som ytterst få ens knystade om vid denna tid.
När Persson kom in på Europas skuldkris svepte han förbi Grekland, Portugal, Irland, Spanien och Italien och underströk sedan att
problemen där är ingenting jämfört med vad som väntar ifall Frankrike börjar vackla.
Per T Ohlsson, Sydsvenskan 2 december 2012


The EU authorities are now in a near hopeless situation.
The logic of EMU is a further erosion of nation states.
The "Two Pack", "Six Pack" and "Fiscal Compact" are all coming into force, and national regulators are losing control over their banking systems. The euro will inevitably lurch from crisis to crisis without some form of fiscal union and debt pooling.
Yet voters have just let forth a primordial scream against any further transfers of power.
With the exception of Germany, the elections were a broad repudiation of EMU austerity.

The two dominant parties of the post-Franco order in Spain saw their share of the vote drop to 49pc from 80pc last time,
with the Podemos radicals coming from nowhere four months ago to win 8pc with a campaign to "stop Spain being a colony of Germany and the Troika".
The austerity coalition that has pushed the Netherlands into debt deflation crashed to 21pc.
The ruling enforcers of EU-IMF Troika policies fell to 31pc in Greece and 28pc in Portugal.

Europe's "Fiscal Compact" has set in motion a doomsday machine,
requiring states to retrench for year after year by law until their debts are ground down to 60pc, and we are all dead.
The best that can be hoped for is 1pc growth in southern Europe through the decade,
too little to prevent a lost youth or to halt the rise in combined public and private debt ratios.

Full text of Ambrose Evans-Pritchard 28 May 2014



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European Spring:
Why Our Economies and Politics are in a Mess and How to Put Them Right, by Philippe Legrain

"a well-informed and blistering critique of errors made by European policy makers since Greece revealed the extent of its fiscal woes in 2009-10.
It is essential reading for those who wonder how an economic powerhouse managed to stumble into a sovereign debt crisis that ended up threatening its very existence.
Review by Ferdinando Giugliano, FT May 25, 2014


As these books all argue, the crisis was always about more than whether financial markets would buy government debt.
It raised broad worries over how countries with widely differing levels of prosperity, competitiveness, public spending and taxes, and regulation of labour and product markets,
could share a currency without economic shocks blowing them apart.

And it was about whether euro-zone voters would accept low growth, high unemployment and a permanent loss of sovereignty to the centre.
The Economist print, May 17th 2014

The Euro Crisis and its Aftermath. By Jean Pisani-Ferry.

European Spring: Why our Economies and Politics are in a Mess—and How to Put Them Right. By Philippe Legrain.

The Trouble with Europe. By Roger Bootle.

Full text

To eliminate the monetary independence of 17 sovereign countries and create a major new world currency is a pretty big undertaking.
It was arrogantly assumed that political will would overcome all problems.
Moreover, although there was political will aplenty, it wasn’t at all clear what was willed.
For no one was ever asked to sign up to the whole caboodle. What was on offer was always monetary union lite.
Roger Bootle, Daily Telegraph 16 October 2011

Ett intressant inlägg kommer från tankesmedjan Bruegel i Bryssel.
I rapporten ”Two crises, two responses” skriver ekonomerna André Sapir och Jean Pisani-Ferry om stora och viktiga skillnader mellan de krisdrabbade ekonomierna.
Som exempel tar de Grekland och Spanien, två länder med olika typer av problem som varken kan eller bör lösas på samma sätt.

DN 7/5 2010


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This month marks the fourth anniversary of the May 2010 financial rescue of Greece.
Clearly, the supposed experts who predicted the imminent disintegration of the eurozone have been proved wrong.
But it is equally likely that those now declaring that the crisis is over will be proved wrong as well.
Barry Eichengreen, Project Syndicate, 12 May 2014


Complacent policy makers and investors imagine the crisis is over.
Avoiding catastrophe is still not guaranteed. That is anyway a grossly insufficient goal.
Martin Wolf, FT, May 13, 2014


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Europe’s Plan Z - The Grexit gamble
Part two of Peter Spiegel’s series from behind the scenes on how the euro was saved
"no single Plan Z document was ever compiled and no emails were exchanged between participants"
Financial Times 14 May 2014

Peter Spiegel reveals how a secret strategy was developed to contain the firestorm from a Greek exit.

June 15 2012 was the Friday before a parliamentary election – the second national vote in as many months – and the country appeared to be edging towards panic.
On that day, Greeks withdrew more than € 3 bn from their bank accounts

Unbeknown to almost the entire Greek political establishment, however, a small group of EU and International Monetary Fund officials had been working clandestinely for months preparing for a collapse of Greece’s banks.
Their secret blueprint, known as “Plan Z”, was a detailed script of how to reconstruct Greece’s economic and financial infrastructure if it were to leave the euro.

Plan Z was never used.
Mr Tsipras’s Syriza party finished second, allowing Greece’s mainstream parties to form an uneasy coalition that eventually agreed to stay the bailout course.
But senior officials said the near-miss that summer, and the ensuing debate about Greek membership, helped focus minds in capitals across the eurozone
– particularly Berlin, where fights over the advisability of Grexit raged for three more months, before Angela Merkel, the German chancellor, finally put an end to them.

Several senior officials said they were stunned Ms Merkel and Mr Sarkozy had aired the idea that the eurozone could be left voluntarily, something that had previously been vigorously denied.

According to one participant, no single Plan Z document was ever compiled and no emails were exchanged between participants about their work.

“It was totally fire-walled even within [the institutions],” said the official. “Even between the teams there was fire-walling.”

A decision was made not to involve Greek officials out of fear of leaks.

Their firewalls worked. During a dinner between José Manuel Barroso, the commission president, and Ms Merkel at the chancellery in Berlin less than two weeks before the Greek vote, Ms Merkel asked for reassurance from Mr Barroso that a plan was in place in case Greece rejected bailout conditions and Grexit ensued.


Mr Barroso acknowledged the plan’s existence and offered to show it to Ms Merkel but she said his word was enough, according to officials in the room.

Under the German system, such documents can be requested by the Bundestag, and senior German officials were concerned they would be obliged to disclose such planning if they had it in writing.

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Part 1-3


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How the euro was saved
In the French seaside resort of Cannes
To the astonishment of almost everyone in the room, Angela Merkel began to cry.
the man sitting next to her, French President Nicolas Sarkozy, and the other across the table, US President Barack Obama
Peter Spiegel, Financial Times 11 May 2014

“Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes.
“Ich bringe mich nicht selbst um.” I am not going to commit suicide.

A cornered Ms Merkel threw the French and American criticism back in their faces. If Mr Sarkozy or Mr Obama did not like the way her government ran, they had only themselves to blame. After all, it was their allied militaries that had “imposed” the German constitution on a defeated wartime foe six decades earlier.

Greece was imploding politically; Italy, a country too big to bail out, appeared just days away from being cut off from global financial markets; and Ms Merkel, try as Mr Sarkozy and Mr Obama might, could not be convinced to increase German contributions to the eurozone’s “firewall” – the “big bazooka” or “wall of money” they believed had to grow dramatically to fend off attacks by panicking bond traders.

And yet less than a year after that November 2011 night, the existential crisis for Europe’s single currency would, for all intents and purposes, be over.

Strict budget rules were made inviolable; banking oversight was stripped from national authorities; and the printing presses of the European Central Bank would become the lender of last resort for failing eurozone sovereigns.

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Part 1-3

Europeiska centralbankens (ECB) högste chef Mario Draghi
Nu har det snart gått två år sedan italienaren uttalade de numera välkända orden
”Inom ramen för vårt mandat, är ECB redo att göra allt som krävs för att rädda euron. Lita på mig, det kommer att räcka”.
Louise Andrén Meiton, SvD Näringsliv, 6 mars 2014

Om man har en sedelpress går man inte i konkurs.
Det var varit det till synes självklara budskapet på denna blog ett antal gånger, första gången i november 2011.
Rolf Englund blog

Tyskland

Freden

President Obama was in France for a meeting of the G20.
In addition the President also held bilateral talks with French President Nicolas Sarkozy and German Chancellor Angela Merkel
US Embassy Paris

Euro stability more important than Greece, says Angela Merkel
German chancellor and Nicolas Sarkozy insist saving the currency the priority in face of surprise Greek referendum
The Guardian, Thursday 3 November 2011

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Charlemagne
Beware of europhoria
Stagnation and a looming political backlash make optimism about the euro overdone
The Economist, May 10th 2014, print edition

If markets once seemed ready to push the weakest countries out of the euro, now it is voters who may pull their escape cord. Support for the European project, always fragile, will keep falling if it fails to deliver greater prosperity.

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It is slow moving variables — long term unemployment, gradual shifts in public opinion, and so on — that pose the greatest threat to the Euro’s survival.
If the far right does as well as people now seem to think it will in the European elections,
this will presumably be presented in the media as a “shock” to the system,
but has it not been obvious since 2010 at the latest that something like this was likely, given Eurozone macroeconomic policies?

And has it not been obvious for years that actually existing EMU is harming the broader European project?
Kevin O Rourke, The Irish Economy, 25 February 2014

Europe’s political leaders should remember what Ernest Hemingway said about bankruptcy.
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”

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German wages fell 0.2pc in 2013. Germany too is in wage deflation.
Which raises the question: how on earth are France, Italy, Spain, Portugal, and Greece supposed to claw back lost labour competitiveness against Germany
by means of "internal devaluations" if German wages are falling?

Ambrose Evans-Pritchard, February 20th, 2014


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Whatever happened to the eurozone crisis?
To many people the eurozone crisis has disappeared. It is off the front pages.
It has certainly left the TV screens. I have heard prime ministers and presidents declare the crisis "over".
Gavin Hewitt, BBC 28 January 2014

The Anglo-Saxon jeremiads have been proved wrong.
There have been no exits from the single currency and significant steps have been taken to fix the design flaws.

It needs to be said at the outset that Europe is still enjoying the "Draghi effect":
the reassurance given by the President of the European Central Bank (ECB) that he would do "whatever it takes" to defend the euro
- and no-one seems willing to bet against the ECB.

To politicians and officials the key question hanging over the euro was its survival. For the moment that question has been laid to rest.

But to the public there is perhaps a more important question - does the single currency deliver prosperity or stagnation?

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ECB


Marknaderna skiter i hur det går för Spanien, Grekland, Italien och andra krisländer
Det enda marknaderna bryr sig om är om dessa länders obligationer kommer att inlösas på förfallodagen, eller ej.
Att dessa länders räntor nu har sjunkit är således inte något tecken på att marknaderna tror att dessa länders ekonomier är på rätt väg.
Rolf Englund blog, 10 januari 2014


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Do you think that the euro will fail?
The euro has already failed.
It was a project that was supposed to create convergence, growth and solidarity between the peoples of Europe, it was supposed to create a commonality among Europeans.
The euro has created divergences, recession, poverty, it is like a straitjacket for Europe, increases the national and the social tensions in Europe.
It succeeds because it instills fear. I do not think this is sustainable for long
Lavanguardia.com, 5 February 2014

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Euron har redan kollapsat I går kväll, efter att ha uppdaterat sidan om "När och hur spricker EMU?" stod sanningen helt plötsligt klar för mig.
Euron har redan kollapsat. Men vi har av någon konstig anledning inte märkt det.
Rolf Englund blog 17 mars 2012


Strong Governments, Weak Banks
Banks in the northern eurozone have capital ratios that are, on average, less than half of the capital ratios of banks in the eurozone’s periphery.
Paradoxically, financially strong governments breed fragile banks.
Paul De Grauwe, Yuemei Ji, CEPS Policy Briefs, 25 November 2013

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Paul De Grauwe

Banks


FORES presenterar en antologi där några av Sveriges kunnigaste ekonomer beskriver bakgrunden till krisen
och hur eurons framtid kan komma att se ut.
Lars Calmfors, Harald Edquist, Nils Lundgren, Stefan de Vylder, Pehr Wissén, och Hans Tson Söderström, bokens redaktör
14 november 2013

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Lars Calmfors: "Överlever euron?" Bokpresentation 14/11, Youtube, Highly Recommended

För Youtube click here

Interndevalvering

Lars Calmfors


Greece, Spain and Portugal need to devalue in real terms by about 30 per cent
relative to the eurozone average in order to correct the distortions that were
brought about before the crisis by the inflationary credit bubble created by the single currency

and thus restore their competitiveness.
Hans-Werner Sinn, Financial Times, November 13, 2013


A concern is that the monetary policy of the ECB is unsuitable for Germany and might even cause asset price bubbles.
This is surely true, just as the monetary policy pursued before 2007 was unsuitable for Ireland and Spain and did indeed drive asset price bubbles.
A central bank called upon to deliver a target rate of inflation in a union of diverse economies will destabilise nearly all the members at some time.
But that is what joining a currency union entails for all members, including even the largest.
Martin Wolf, FT, November 12, 2013

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Europe Breakup Forces Mount as Union Relevance Fades
Collapse, slow decline, or renaissance are the EU’s three alternative futures, a U.S. intelligence analysis argued last year
Their “Global Trends” paper - released on the same day in December 2012 as EU leaders accepted the Nobel Peace Prize in Oslo - found a “low” likelihood of collapse, in which the euro and European single market fragment and civic order breaks down.
Bloomberg, Oct 22, 2013

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Global Trends

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Sieps uppdrag är att på ett självständigt och allsidigt sätt belysa aktuella europapolitiska frågor.
EU och världsekonomin har i och med den finansiella och ekonomiska krisen upplevt den kraftigaste ekonomiska nedgången sedan andra världskriget.
Återverkningarna märks i dag på flera sätt, inte minst genom
euroländernas svåra statsskuldkris, som har resulterat i ett mycket starkt politiskt förändringstryck.
Sieps 2012-2014

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SIEPS remissvar på Lissabon
Det är inte tillfredsställande att grundlagen ger ett så vagt och otydligt besked om förutsättningarna för Sveriges medlemskap i EU
Klicka här

Sieps var en gång en förhållandevis aktad organisation med viss akademisk prägel.
Nu är budskapen mer i Gunnar Hökmarks anda.

Sieps förlorade heder

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Debt loads rise faster than nominal GDP - The "denominator effect"
The complacency of those dictating Euroland's policies - though not its victims - is breathtaking.
"Europe, it seems, has become anaesthetised to bad news,"
Ambrose, September 4, 2013

So says Simon Tilford from the Centre for European Reform. Tentative signs of life after six quarters of contraction are deemed a vindication of shock therapy, even as the underlying crisis gets worse in almost every key respect.
"The reality is that the Spanish and Italian economies will shrink by a further 2pc in 2013.
Greece is on course to contract by an additional 5pc to 7pc and Portugal by 3pc to 4pc.

Far from being on the mend, the economic crisis across the South is deepening. Real interest rates are increasing from already high levels," he said.

Europe has not recovered. It has begun to stabilise, but only just, amid mass unemployment, with debt trajectories still spiralling out of control in Italy, Portugal, Spain and once again in Greece.

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Hur kan man undvika att inse att 25 procents arbetslöshet är en katastrof för land och folk?
Rolf Englund blog 27 augusti 2013

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Hollande Bids Adieu to EU Vacation Culture as Crisis Lingers
six years after a phone call from Frankfurt shattered former European Central Bank President Jean-Claude Trichet’s holiday in northern France.
The caller informed him that three troubled BNP Paribas SA hedge funds were causing money markets to seize up, the first signal that a global financial crisis was breaking out.
Bloomberg, Aug 26, 2013
You could read about it at the time on this website


The euro zone crisis could be largely over by the end of the year
Holgar Schmieding, chief economist at Berenberg Bank,
told CNBC 12 March 2013

"We are now only at a very small risk of the break up of the currency.

A year ago going into the Greek elections, the risk was more severe. Now, [the euro zone crisis] looks fairly contained

unless Italy throws a very funny surprise,"

"Except in Italy, where we have to ask in a post-Monti [environment] what happens next, the political risks to the euro have receded,"

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Det vi beskådar är inte eurons kris.
Ordet kris antyder något övergående, ljuset i tunneln kommer snart...
Det vi beskådar är eurons dödskamp.
Slutet kan bara bli ett.
Men varför skall miljoner människor lida för att Angela Merkel skall hinna bli omvald i september?
Rolf Englund 11 mars 2013

Början på sidan


Once the French get into a full-scale crisis, it’s over.
Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank A/S,
said the euro’s recent rally is illusory and the shared currency is set to fail
because the continent hasn’t supported it with a fiscal union.

Bloomberg 18 February 2013

“Another possible fallout is getting rid of some of the countries that are being ruined by being in the euro, notably the southern European economies,” Christensen said.
“People have been dramatically underestimating the problems the French are going to get from this. Once the French get into a full-scale crisis, it’s over. Even the Germans cannot pay for that one and probably will not.”

“It’s the political world that has been extremely supportive of the euro, not for economic reasons but for political reasons,” said Christensen, a long-time critic of the single currency and who now lives in Switzerland.

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Frankrike

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Gloomsters buried the euro too soon
The turning point came when Chancellor Angela Merkel concluded that
a eurozone collapse would risk the break-up of the EU.

Philip Stephens, FT January 31, 2013


"Intellectuals"
Elva av Europas skarpaste hjärnor tycker att en politisk union är nödvändig,
annars kommer valutan att överleva i ett par decennier innan den kollapsar till följd av kriser och krig.
”Socialism eller barbari, brukade vi säga. Idag står valet mellan en politisk union och barbari.
För att vara mer exakt: federalism eller kollaps – följt av social misär, osäker arbetsmarknad och en tsunami av uppsägningar och fattigdom.”
SvD Näringsliv, 28 januari 2013


Why the Euro Zone Crisis is Over…Until September
CNBC 21 Jan 2013

On Sunday, Merkel's conservative coalition lost regional elections in Lower Saxony, one of the country's most populous states.
Merkel's Christian Democratic Union (CDU) has now lost its majority in the upper house of the German parliament, the Bundesrat, which could make it harder for Merkel to introduce policies in the federal parliament without compromising with opposition parties, Newton told CNBC.

So far, Merkel's euro zone policy decisions have only been constrained by public opinion and Germany's constitutional court,

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Tyskland


I ett alltmer instabilt lapptäcke av IMF-åtgärder, europeiska länder utan egna sedelpressar och tecken på riktig depression
har både ekonomer och ledarsidor de senaste månaderna börjat bubbla om att EU kanske ändå borde anamma ett konkursförfarande i Kruegers gamla anda.
Nu är hedgefonder med i leken om statsskulder också, och mindre kompromissvilliga gäldenärer är svåra att finna
Jenny Nordberg, SvD 20 januari 2013

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Martin Wolf och Rolf Englund om att den som har en sedelpress går inte i konkurs.
Ganska självklart, men vänta till Wolf har förklarat det vetenskapligt
Rolf Englund blog 23 maj 2012

Början på sidan


The real risk for the global economy is in Europe.
Spain and Greece are in depression, with no hope of recovery in sight.
The eurozone’s “fiscal compact” is no solution, and ECB’s purchases of sovereign debt are at most a temporary palliative.
Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, Project Syndicate 31 december 2012

If the ECB imposes further austerity conditions (as it seems to be demanding of Greece and Spain) in exchange for financing, the cure will only worsen the patient’s condition.

Likewise, common European banking supervision will not suffice to prevent the continuing exodus of funds from the afflicted countries. That requires an adequate common deposit-insurance scheme, which the northern European countries have said is not in the cards anytime soon.

While European leaders have repeatedly done what previously seemed unthinkable, their responses have been out of synch with markets. They have consistently underestimated their austerity programs’ adverse effects and overestimated the benefits of their institutional adjustments.

Read more at http://www.project-syndicate.org/commentary/risky-europe-and-america-in-2013-by-joseph-e--stiglitz#b11VlTEMJExumiKJ.99

Will the dam break in 2007?
Joseph Stiglitz, The Guardian 27/12 2006

Joseph Stiglitz

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The EMU disaster is not at root a public debt crisis, and never was.
As EMU leaders themselves say – correctly – Euroland's aggregate public debt is lower than in the UK, US, and Japan as a share of GDP.
What Europe faces is a north-south incompatibility crisis,
the result of ramming together misaligned economies and countries into a single currency.

Ambrose Evans-Pritchard, January 8th, 2013

Whether you think this matters depends on whether you think the democracies of southern Europe will tolerate slow grinding depression – with no light at the end of the tunnel – for year after year.

The denouement is hard to predict in such situations. Political upheavals are famously non-linear. But the situation in Spain is remarkable, with the added nitroglycerine of a ruling party determined to exploit the crisis to take power back from the regions, and Catalonia determined to resist with all means at its disposal.

Data from Tinsa released today shows that Spanish house prices fell 11.3pc last year, and are now down 33.3pc from the peak in 2007.

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Spain

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Eurozone governments’ determination to stop the liquidity crisis
is matched only by their refusal to recognise the solvency crisis.

Wolfgang Münchau, Financial Times, October 28, 2012

The ECB’s support cannot help in the solvency case because the central bank is not allowed, by its own legal definition, to write off or participate in a restructuring of any debt it holds.

Germany was now ready to accept a two-year extension of the Greek programme, but there would be no new money, leaving Greece itself to fund the gap – something that is simply not going to happen.

The refusal to let the European Stability Mechanism fund Spanish banks directly falls into the same category. Debt that has arisen in Spain will remain debt of the Spanish state as ultimate guarantor.

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Grekland

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In 2010, US banks had assets of €8.6tn. But those of the EU’s were €42.9tn.

In the US, bank assets were close to 80 per cent of gross domestic product.
In the EU, they were 350 per cent.
EU has a banking sector that is not only too big to fail, but too big to save
Martin Wolf, Financial Times, 4 October 2012

Half of the world’s 30 biggest banks are headquartered in the EU. If the EU makes a mess of banking, it can explode the world economy.

In brief, while individual US banks may be “too big to fail”, the EU has a banking sector that is not only too big to fail, but too big to save.

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Basel

Too big to fail

Banks


The ECB action will not prevent countries like Spain from having a pretty terrible few years.
But, for the first time since the start of the crisis, the eurozone - on paper at least - has what Americans would call a catastrophic insurance policy.
Stephanie Flanders, BBC Economics editor, 7 September 2012


The ECB is saying that it will seek to eliminate the threat of a break-up, except when this threat is most real,
which is. of course, precisely when the country is failing to meet policy conditions.

Martin Wolf, Financial Times 11 september 2012


Spain and Italy are at the heart of the story, which could yet end with a breakup of the euro zone.
A botched rescue of Greece will not in itself deal a body blow to the euro.
A botched rescue of Spain and Italy could.
BusinessWeek 26 July 2012

The bottom line: If a bailout of Spanish sovereign debt costs €300 billion, then the Europeans may lack the funds needed to rescue Italy.

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Det som händer i Europa är stort, mycket svårt att greppa, och åtgärderna som föreslås är stundtals radikala.
Det säger sig självt att en massiv uppbyggnad av nya institutioner under panikartad brådska inbegriper stora risker.
SvD-ledare 30 juli 2012

Början på sidan


German, French or other savers may hold bank accounts, pensions, insurance policies.
The economic reality is that their savings are bound up in Irish or Spanish buildings of little value
or inflated Greek public sector wages consumed years ago.
These claims cannot be liquidated. At best they can, in time, be honoured
– but only if growth returns to the debtors.
Martin Sandbu, Financial Timnes, 25 July 2012

Investors’ panic does the opposite. They cannot repatriate capital that has been invested or consumed, but their attempt to do so has meant an abrupt halt of new funding. The periphery’s need to reduce current account deficits equally abruptly is the main cause of the recessions. By refusing to extend new financing, investors are ruining their chance of recouping their own investments.

The way the eurozone’s imbalances are being unwound is poisoning what solidarity the monetary union used to possess.

It is not sufficiently appreciated that these imbalances were driven by private investors.
When money flowed from, say, Germany to Spain or Ireland, it did so between the stewards of Germans’ savings
– banks, insurance companies, pension funds – and Irish and Spanish banks.

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Welcome to Martin E. Sandbu's website.


Euro Zone as We Know It Has Two Years Left
Goldman Sachs Asset Management Chairman Jim O'Neill, 25 July 2012

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If EMU Exists In 5 Years
Goldman Sachs Asset Management Chairman Jim O'Neill, 23 May 2012

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Fiskal Union
En ny undersökning från Stockholms Handelskammare visar att Stockholmsregionens kommunpolitiker
anser att skatteutjämningssystemet inte bara missgynnar Stockholm,
utan att det dessutom dämpar tillväxten och bostadsbyggandet i regionen"
Fredrik Johansson, analys- och policychef Stockholms Handelskammare och Sofia Linder, analytiker Stockholms Handelskammare, SvD 25 juli 2012

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Man bör fråga sig hur det kommer sig att vi i Sverige överför stora belopp inom vårt land mellan olika regioner
och att detta har brett politiskt stöd. De kommunala skatteutjämningsbidragen är lika viktigt som okänt för allmänheten.
Varför är Sverige en fiskal union?
Rolf Englund blog 19 februari 2012

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”Det handlar alltså inte om en gigantisk överstatlig finanspolitisk union”, det ser bara ut så.
Det sista lade jag till. Det första skrev EBRD:s chefsekonom Erik Berglöf på DN Debatt (25/7), två gånger, i början och i slutet av artikeln.
Allt däremellan handlar om hur vi är på väg att bilda en gigantisk finanspolitisk union.
SvD-ledare, Alen Musaefendic, 28 juli 2012

Debattartikeln är en bra sammanfattning av den inte mycket mer detaljerade tiosidiga rapporten, Breaking the Deadlock: A Path out of the Crises, varpå artikeln baseras.

Mecenaten bakom rapporten är Institute for New Economic Thinking (INET); ett ungt institut grundat av George Soros 2009, en inte fullt lika ung legend inom valutaspekulation och välgörenhet.

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Federalism

Svenska Dagbladet


Liksom i juli 1914 vandrar Europa lealöst mot en katastrof av ofattbara proportioner
”En bankunion kan rädda det europeiska projektet”
Erik Berglöf, chefsekonom för den europeiska utvecklingsbanken EBRD och medlem av INET, Council on the Eurozone Crisis.
Han ingår i gruppen som arbetat fram förslaget.
DN Debatt 25 juli 2012

INET, Council on the Eurozone Crisis

EBRD

Krisen i eurozonen kan fortfarande lösas, men för det fordras att Europas ledare förmår separera två problem:
att hantera de kostnader som eurosystemets ursprungliga brister förorsakat
och att laga själva systemet.

Detta är huvudpunkterna i det förslag för hur krisen ska lösas som i dag presenteras av en grupp av 16 europeiska nationalekonomer från de flesta av EU:s stora medlemsländer, inklusive fyra framstående tyska ekonomer av olika politisk färg. Utgångspunkten är att en lösning inte bara måste vara hållbar ekonomiskt men också politiskt möjlig att genomföra.

Alla som var med om att skriva under Maastricht-avtalet som lade grunden till euron har ett ansvar. Alla måste vara med och dela på de kostnader som uppstått till följd av eurons brister och för det massiva krisprogram som fordras för att få tillbaka tillväxten i alla medlemsländer.

En insättarförsäkring skulle som i Sverige kunna baseras på en gemensam fond uppbyggd genom avgifter på bankerna, men den skulle också fordra någon form av delat betalningsansvar, exempelvis via ECB, om kostnaderna för en kris skulle överstiga fondens resurser.

En bankunion ger också hopp om en förnyad demokratisk legitimitet för det europeiska projektet. Medborgarna i den Europeiska unionen har med växande skepsis sett hur makt överförts till europeiska institutioner utan att åtföljas av motsvarande politiskt ansvar. Men de har också med tilltagande indignation följt hur bankerna och deras ledningar kommit mer eller mindre oskadda ut ur krisen samtidigt som skattebetalarna fått bära kostnaderna för deras misstag.

För att eurosystemet skall fungera på lång sikt måste den europeiska centralbanken ECB ta ett ökat ansvar, inte bara för en bankunion, men också fungera som ”lender of last resort”. En viktig del i dess ökade ansvar vore att ge den nya ekonomiska stabilitetsfonden ESM en banklicens så att den kan låna från ECB.

Allt detta kan ske utan att i grunden ändra ECB:s statuter.

Det behövs med andra ord inte någon gigantisk överstatlig finanspolitisk union.

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Eurokrisen, fisksoppan och elitens olidliga dumhet
Man läser dagligen, för att inte säga stundligen, nya artiklar om riskerna för att euron skall kollapsa och att ett antal länder skall återgå till sin egen valuta.
Alla, vare sig de önskar eller icke önskar en sådan utveckling är ense om att svårigheterna är stora.
Man kommer då osökt att tänka på att hur lätt det är att göra fisksoppa av ett akvarium, men hur mycket svårare det är att göra ett akvarium av en fisksoppa.
Nu har de, som tror sig vara Europas elit, bildat euron och sitter nu där med sin fisksoppa.
Rolf Englund blog, 28 november 2011


Med en gemensam real ränta måste man ha en gemensam central myndighet/regering och stora transfereringar mellan valutaområdets olika delar
Följden av EMU blir därför ett Europas Förenta Stater, vare sig man vill det eller ej.
Antingen får man ett Europas Förenta Stater, alldeles för tidigt,
eller så kommer EMU-projektet att haverera, i en röd-grön röra av förfärande dimensioner
Rolf Englund (m) i Österåkers kommunfullmäktige den 14 december 1998


The Institute For New Economic Thinking
”en dominobricka efter den andra”
Senast ut: Spanien, som enligt experterna bara är dagar ifrån en allvarlig likviditetskris.
Kristoffer Törnmalm, SvD Märingsliv, 25 juli 2012

”Breaking the Deadlock: A Path Out of the Crisis” (Bryta dödläget: En väg ut ur krisen).
Så heter en ny rapport från The Institute For New Economic Thinking där 17 ledande internationella ekonomer utvärderar den ekonomiska krisen i Europa och ger tips på hur unionens politiker ska ta sig ur knipan.
Deras grundtes är att Europa aningslöst rör sig mot en såväl ekonomisk som humanitär katastrof där ”en dominobricka efter den andra” den senaste tiden har fallit in i krisen. Senast ut: Spanien, som enligt experterna bara är dagar ifrån en allvarlig likviditetskris.

För att angripa problemet vid roten anser ekonomerna att unionens länder bör lägga alla skulder som överstiger 60 av landets BNP, allt enligt Maastrichtavtalet, i en gemensam pott med Tysklands kreditvärdighet som garant.

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Europe is “sleepwalking towards disaster”
The lack of any light at the end of the tunnel is leading to a populist backlash in both the debtor and creditor states.
The only question is whether the North or the South succumb to revulsion first.
“The sense of a neverending crisis, with one domino falling after another, must be reversed.
The last domino, Spain, is days away from a liquidity crisis,” said the economists.
They include two members of Germany’s Council of Economic Experts and leading euro specialists at the London of School of Economics, all euro supporters.
Ambrose, 24 July 2012

“This dramatic situation is the result of a eurozone system which, as currently constructed, is thoroughly broken. The cause is a systemic failure. It is the responsibility of all European nations that were parties to its flawed design, construction and implementation to contribute to a solution. Absent this collective response, the euro will disintegrate,” they added in a co-signed report for the Institute for New Economic Thinking.

Institute for New Economic Thinking

They claimed the system could be stabilised immediately by creating a lender of last resort to back-stop the bond markets, either by mobilising the ECB or by giving the eurozone bail-out fund (ESM) a banking licence to borrow from the ECB.

The lack of any light at the end of the tunnel is leading to a populist backlash in both the debtor and creditor states. The only question is whether the North or the South succumb to revulsion first.

Spain

Början på sidan

Startsida EMU


Had Greece still had its drachma the shortcomings of the country's financial accounts would have been much clearer for all to see much earlier
A free-floating drachma would have given Greek voters an indication of how good their government was on the economy
It would also have made the risk of lending to the Greek government much more transparent to German and French banks
which in turn would have made it more difficult for the Greek government to pile up such a mountain of debt in the first place
David Champion, Harvard Business Review Blog Network, June 29, 2012

Rubrik: The Wisdom of the Currency Crowd

Extraordinary Popular Delusions and the Madness of Crowds

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Början på sidan

Startsida EMU


IMF:
"The euro area crisis has reached a new and critical stage.
Despite major policy actions, financial markets in parts of the region remain under acute stress,
raising questions about the viability of the monetary union itself,"

Telegraph staff and agencies, 18 July 2012

IMF Executive Board Concludes Article IV Consultation on Euro Area Policies
Public Information Notice (PIN) No. 12/80, July 18, 2012


Själv röstade jag ”ja” till att Sverige skulle gå med i valutaunionen vid folkomröstningen 2003
Jag har svårt att tro på idén om en långtgående centralisering av finanspolitiken
Alternativet är en partiell eller total upplösning av valutaunionen
Jag ansluter mig till dem som menar att Sverige bör avvakta EMU:s framtida utveckling innan vi på nytt tar upp frågan om ett svenskt medlemskap
Assar Lindbeck, DN Debatt 17 juli 2012

Kommentar av Rolf Englund:
Huvudnyheten i artikeln är att Assar Lindbeck förutser, antagligen även förespråkar, en partiell eller total upplösning av valutaunionen,
eftersom han inte tror på alternativet, en långtgående centralisering av finanspolitiken.


Kommer Europa låta Bryssel ta över den ekonomiska makten eller läggs EMU-projektet ner?
Endera måste ske och det mesta talar för att Bryssel tar hem spelet.
Det lär vi i så fall få ångra i generationer framåt.

Resonerar man kring vad som är ”långsiktigt hållbart” så landar man lätt i slutsatsen att eurons dagar är räknade.
Det finns dock starkare krafter som talar för att EMU-länderna trots allt lär ge upp makten till Bryssel.
Etablissemanget vill det. Nästan alla etablerade partipolitiker kommer framstå som åsnor om EMU havererar.
Marknaden vill det. Finansiella marknader har nästan alltid ett kortsiktigt fokus och bryr sig inte om vad som är rättvist eller demokratiskt.
Lobbyisterna vill det. Hela banksektorn och tyska exportindustrin kämpar med alla medel för att euron ska överleva.
Peter Benson, SvD Näringsliv 21 juli 2012

Grekland lämnar sannolikt EMU. Men istället för att leda till att euron havererar så lär Greklands djupa kris bli ett tacksamt slagträ när EMU-lobbyn ska skrämma opinionen till att acceptera Bryssels nya maktfunktioner.

Under hotet att bli ett nästa Grekland kommer medborgarna låta ett nytt EU-fördrag kuppas igenom.

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ECB President Mario Draghi
The euro is “irreversible” and is not in danger of collapsing
eurozone nations will eventually be bound even closer together
analysts have been too pessimistic and had not recognised the political will behind the eurozone
Telegraph 21 July 2012

Nils Lundgren 2011:
Om man ställer till rejäla kriser, så kan varje nationell maktelit skrämma sitt folk till underkastelse. De tvingas acceptera.
EU-kommissionens tidigare ordförande, virrpannan Romano Prodi, var så omedveten att han skrev en kolumn i självaste Financial Times (20 maj 2010),
där han lugnt konstaterade att han och alla de andra som drev fram europrojektet naturligtvis visste att det skulle leda till en svår kris förr eller senare.

"I am sure the euro will oblige us to introduce a new set of economic policy instruments.
It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."
Romano Prodi, EU Commission President. Financial Times, 4 December 2001

Federalism

Freden

Det Stora Språnget


"Lätt som en plätt"
Egentligen handlar eurokrisen om att Sydeuropa aldrig lyckats hålla jämna steg med konkurrenterna från Nordeuropa.
Så länge varje land hade sin egen valuta var det ingen tragik i detta.
Skillnaderna i produktivitetsutveckling kunde då regleras med att den tyska D-marken årligen förstärktes någon procent mot de svagare konkurrentländerna.
Peter Benson, SvD Näringsliv 14 juli 2012

Artikeln om eurokrisens scenarier visar hur arbetskraftskostnaden per tillverkad enhet har förändrats sedan euron infördes. I Tyskland har kostnaden ökat noll procent medan tillverkning i Italien och Spanien nu är ungefär en tredjedel dyrare. Valutakursen för euron balanserar dock mitt emellan dessa båda ytterligheter vilket innebär att tysk export får turbofart av en svag valuta samtidigt som det omvända gäller för Italien och Spanien.

Med den breda penseln kan man måla upp två huvudscenarier för framtiden.
Dessa scenarier kallar jag ”Euron havererar” respektive ”Bryssel tar makten”.


Eurokrisens scenarier:
Haveri eller ökat makt till Bryssel?

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Federalism

Början på sidan

Startsida EMU


Jesper Stage och Magnus Henrekson
Det råder stor splittring mellan ledande nationalekonomer i Sverige om hur eurokrisen ska lösas.
Ekot 13 juli 2012

Jesper Stage, professor i nationalekonomi vid Mittuniversitetet i Sundsvall, tycker att euroområdets makthavare borde fokusera på att få fart på ekonomin igen.

– Inflationsmålet inom euroområdet borde höjas till åtminstone tre procent eller kanske mer. Med den inflationsnivå som gäller nu bygger man in massarbetslöshet i krisländerna under lång tid framöver, säger Stage.

Jesper Stage är en av många ekonomer som skrivit under manifestet för ekonomisk sans som nobelpristagaren i ekonomi Paul Krugman skapat på Internet. Det beskriver i dramatiska ordalag hur misstagen från krisen på 1930-talet nu håller på att upprepas. Krugman tillhör den keynesianska skolan som förespråkar en aktiv finanspolitik.

Men andra svenska ekonomer tycker att Stages och Krugmans syn på hur krisen ska lösas är naiv. Tillväxtreformer och uteblivna besparingar är kostsamma på kort sikt och kräver att Tyskland och andra stabila länder öppnar den stora plånboken. Det är inte rimligt, menar bland andra professor Magnus Henrekson som är VD på Institutet för Näringslivsforskning.

– Med stor sannolikhet kommer man inte få tillbaks de här pengarna och det ska politikerna ta ansvar för gentemot sina nationella väljare. Som det ser ut i dag är väljarna inte intresserade av det utan kommer rösta bort en politiker som fattar ett sådant beslut.
Det är lätt att vara ekonom och mästra men det är väldigt svårt för en riktig politiker, säger Henrekson.

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Magnus Henrekson, professor nationalekonomi SvD Näringsliv 27 juli 2011
– Vad man borde göra är en sak, vad man faktiskt gör är en helt annan. Grekland, Portugal och Spanien hör inte hemma i eurosamarbetet. Men mycket prestige har investerats i projektet och man kommer säkert att försöka hålla dem under armarna så länge det går.
Magnus Henrekson menar att de aktuella länderna inte är tillräckligt flexibla och politiskt transparenta. Han påpekar att eurosamarbetet från början motiverats som ett fredsprojekt, något han nu ser som paradoxalt.
– Att tvinga fram sanktioneringar som gör att de som sköter sig ska stötta de som missköter sig leder till fiendskap om något.

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Freden

Magnus Henrekson, VD på Institutet för Näringslivsforskning.
Han var under åren 2001–2009 innehavare av Jacob Wallenbergs forskningsprofessur i ekonomi med särskild inriktning på det svenska näringslivets utveckling och den ekonomiska politiken vid Handelshögskolan i Stockholm.
Mer här

Varför går det bra för Sverige? : om sambanden mellan offentlig sektor, ekonomisk frihet och ekonomisk utveckilng av Andreas Bergh, Magnus Henrekson

Bokus

Överlever EMU utan fiskal union?
Arrangör: Högskolan på Gotland och Europaperspektiv – de svenska universitetsbaserade nätverken för Europaforskning
Dag: 5/7 2011 10:00 - 12:00
Typ av evenemang: Seminarium & mingel

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Startsida EMU


The dream of the unification of Europe goes back at least to the 15th century
It is important to appreciate that the movement for European unification began as a crusade for cross-border amity and political unity, combined with freer movement of people and goods.
Giving priority to financial unification, with a common currency, came much later, and it has, to some extent, started to derail the original aspiration of European unity.
Amartya Sen, Guardian, 3 July 2012

The so-called "rescue" packages for the troubled economies of Europe have involved insistence on draconian cuts in public services and living standards.

The hardship and inequality of the process have frayed tempers in austerity-hit countries and generated resistance – and partial non-compliance – which in turn have irritated the leaders of countries offering the "rescue".

The very thing that the pioneers of European unity wanted to eliminate, namely disaffection among European nations, has been fomented by these deeply divisive policies (now reflected in such rhetoric as "lazy Greeks" or "domineering Germans," depending on where you live).

Freden

On the economic side, too, the policies have been seriously counterproductive, with falling incomes, high unemployment and disappearing services, without the expected curative effect of deficit reduction.

So what has gone wrong? Two issues need to be separated out:
one, the counterproductive nature of the policy of austerity imposed on (or, as in Britain, chosen voluntarily by) governments;
and two, a reasoned suspicion about the lack of viability of the shared euro.

The problems we are seeing in Europe today are mainly the result of policy mistakes:
punishments for bad sequencing (currency unity first, political unity later);
for bad economic reasoning (including ignoring Keynesian economic lessons as well as neglecting the importance of public services to European people);
for authoritarian decision-making;
and for persistent intellectual confusion between reform and austerity

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Members of the Financial Policy Committee (FPC), the Bank of England’s risk regulator,
“judged that the overall capitalisation of the banking system was unlikely to be sufficient for stability to be assured” if there were “severe but plausible” developments in the sovereign debt crisis
Telegraph 6 July 2012

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The record of the interim Financial Policy Committee reveals members thought
the risks to financial stability so serious that they were willing to consider a suspension of the Financial Services Authority’s world-leading liquidity rules
Financial Times 7 July 2012

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Det finns två huvudvägar för att rädda Europas ekonomi från en katastrofal utveckling - om man nu vill det.
Den ena vägen förutsätter att alla länder stannar kvar i euron. Den andra att ett eller flera länder lämnar.
Här ska jag göra en kort analys av den första vägen.
Danne Nordling, 6 juli 2012

Om vi börjar i slutändan måste dels Grekland och dels Spanien och Italien förhindras från att bli så bankrutta att de måste lämna euron.
Greklands problem borde vara lättast att lösa eftersom Grekland är så litet.

För att motverka den ökande risken för en statsbankrutt måste Greklands tillväxt bli positiv istället för negativ. Den konventionella teorin säger att om ett antal år kommer åtstramningsåtgärderna att leda till att företagen börjar investera och expandera igen.

Problemet är att teorin är utformad för länder som kan devalvera, vilket i Greklands fall är omöjligt inom euron.
Dessutom skulle processen ta för lång tid och leda till statsbankrutt långt innan teorins hägrande förbättringar kunde anas

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Draghi also poured cold water on a third option
— allowing the ESM rescue fund to have access to the ECB's cheap loans,
which would dramatically boost its firepower and allow it to intervene with real impact on bond markets,
where Spain's benchmark yields have again breached 7 percent.
"I don't think there is anything to gain in destroying the credibility of an institution,
asking it to behave outside the limits of its mandates," he said.

CNBC Friday, 6 July 2012

Nouriel Roubini, once known as "Dr. Doom" for bearish views predicting the 2008 financial crash,
told Germany's Handelsblatt on Friday
he would give the euro another three to six months:
"Then Italy and Spain will lose access to capital markets."

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The US is a federal nation state, not a federation of nations like the EU.
A nation state is a country in which the majority shares, if not necessarily common ancestry and religion, at least a common language and culture.
Unlike the EU, and like modern Germany and modern Italy, the US is a federal nation state whose political unification and preservation in the civil war was enabled by a pre-existing, extra-political national identity.
Michael Lind, Financial Times, 5 July 2012

The writer is author of ‘Land of Promise: An Economic History of the United States’ and a co-founder of the New America Foundation

Hamilton probably would have scoffed at the idea that federal institutions devised to unite Massachusetts, Virginia and New York could unite Germany, Greece and Poland.

In 1802 he wrote: “The safety of a republic depends essentially on the energy of a common national sentiment; on a uniformity of principles and habits; on the exemption of the citizens from foreign bias, and prejudices; and on that love of country which almost invariably be found to be closely connected with birth, education and family.”
Hamilton argued that “hardly any thing contributed more to the downfall of Rome than her precipitate communication of the privileges of citizenship to the inhabitants of Italy at large”.

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The respected economist and Telegraph columnist Roger Bootle summarises
the argument for an orderly break-up of the eurozone if a struggling member was forced to leave
that won him the Wolfson Economics prize
5 July 2012

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Not only must any agreement fit the needs of these three leaders.
It will not be worth much unless it also ends the market onslaught on governments and banks.
That requires, in the short term, action on Spain’s and Italy’s borrowing costs,
and for the long term, a real commitment to eurozone banking union.
Neither may be achievable.
The tools exist to give Spain or Italy a reprieve – though not both.
Financial Times, editorial 27 June 2012

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Hanteringen av Spaniens och Italiens statsfinansiella problem är förmodligen avgörande för EU:s framtid.
Dessa länder kan vara ”too big to save”. Blir deras statsfinansiella kriser akuta, är det bästa antagligen att genomföra stora skuldnedskrivningar
och sedan ge mer begränsade stöd för att rädda de banker som då hotar att gå omkull till följd av kapitalförluster på sina statspapperinnehav.
Lars Calmfors, Kolumn DN 27 juni 2012

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What is needed is a solution that is both politically feasible and economically workable
Not only to achieve agreement among governments responsible to national electorates, but also to obtain at least toleration of that agreement among those voters
Economic workability means offering electorates enough hope for the future to persuade them to elect leaders prepared to stick with membership of the eurozone
I no longer believe this could work
Martin Wolf, Financial Times 26 June 2012


"Det finns ingen anledning till oro"
Det är ett allvarligt ekonomiskt läge i euroområdet,
men varningarna om en kollaps för euron är överdrivna.

Magdalena Andersson, Socialdemokraternas ekonomisk-politiska talesperson, DI 25 juni 2012


Europa saknar de verktyg som är nödvändiga i en allvarlig kris:
en centralbank som ser till att avvärja finansiell panik och fungera som långivare i nöd, gemensamma institutioner för att övervaka och ta över banker i kris,
en europeisk finanspolitik som möjliggör för enskilda stater att ha budgetunderskott under en övergångsfas medan ekonomin sakta börjar återhämta sig.
EU-ledarnas besked till krisländerna de senaste åren har i stället varit att de ska återställa balansen i sina budgetar,
trots att underskotten i allt väsentligt orsakats av depressionen, inte tvärtom.

Peter Wolodarski, Dagens Nyheter 24 juni 2012


He said the eurozone crisis can have one of three outcomes.
Either Germany allows the ECB to backstop everything.
Second, Germany leaves.
Third Italy leaves.

Number is two is not going to happen, so we are left with the bifurcation we have forecasting for a long time.

Either they agree a full backstop – which can logically only come from the ECB, and which in turn requires a political union – or the eurozone collapses.

Berlusconi says Italy should quit eurozone unless Merkel changes course
Ok, he is no longer Italy’s prime minister, but he is still the leader of one of Italy’s most important political parties.
Eurointelligence Daily Briefing 21.06.2012


Just in time for the G-20 Summit,
the cover of "Newsweek" magazine showed a broken one-euro coin surrounded
by the words "Kaput? Fini? Finito? The End?"
Der Spiegel 19 June 2012

On Monday morning EU Commission President José Manuel Barroso lost it when a Canadian reporter in shorts wanted to know why the North Americans should be responsible for the problems of rich Europeans. "We are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy," Barroso fumed. "By the way, this crisis was not originated in Europe. This crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices from some sectors of the financial market."

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Eurozone crisis explained
BBC 19 June 2012

Click here

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Under no circumstances whatsoever could the eurozone members span a protective umbrella over Europe's big countries, like it has for the small ones.
Altogether, Greece has received 460 billion euros so far. That cannot be repeated proportionately for the big countries.
We are fast approaching a tight spot where things are getting very difficult.
Hans-Werner Sinn, president of the Ifo research institute, Deutsche Welle 17 June 2012

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printscreen from WSJ

World leaders must draw up a “concerted global action plan” to deal with the eurozone crisis at next week’s G20 summit
as countries including Italy and France may need international assistance,
Gordon Brown has warned, Telegraph 15 June 2012

In an article for news agency Reuters Mr Brown urged leaders to follow the example set at the 2009 London G20 summit, after the last credit crisis, when an international bail-out was agreed.

Full text at Telegraph

Start page


Ivan Krastev, head of the Centre for Liberal Strategies, a Bulgarian think-tank,
compares and contrasts the collapse of the Soviet Union with the woes of the European Union.
He warns European leaders:
The Soviet collapse teaches us that just because the economic costs of disintegration would be very high,
this is not a reason for it not to happen.

To believe that the EU cannot disintegrate simply because it would be too costly
offers only weak reassurance that the Union will continue to be stable
Charlemgnes Notebook, The Economist 28 May 2012

Paradoxically, the belief that the Union cannot disintegrate, backed by the economists and shared by Europe's political class, is one of the risks of disintegration.

The last years of the Soviet Union are a classical manifestation of this dynamic. The perception that disintegration is 'unthinkable' could encourage policy makers to try to push dangerous policies under the assumption that 'nothing really bad can happen' in the long term, and foster the idea that anti-EU policies or rhetoric might even be helpful in the short term.

The Soviet collapse is the most powerful demonstration that the disintegration of the EU need not be the result of a victory of anti-EU forces over pro-EU forces.

More likely, it will be the unintended consequence of the growing dysfunction of the system and the elites' misreading of the political dynamics in their own societies.

Reflecting on the Soviet collapse, the eminent historian Stephen Kotkin is convinced that the real question to be asked is, "why the Soviet elite destroyed its own system?"

The Soviet collapse is the best demonstration that the rise of anti-integration forces can be the outcome, rather than the cause of collapse.

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Ivan Krastev, Wikipedia

Full text of Krastev


Apokalyps nu?
Kändisekonomerna sprider skräck med sina domedagsprofetior.
Europas politiker får underbetyg för skötseln av skuldbergen i medelhavsländerna, bankerna och euron.
Usel hantering leder till euroupplösning och kraschlandning i ekonomin.
Men det finns en motbild
Jens Henriksson, VD för Stockholmsbörsen Nasdaqomx och Andreas Cervenka, ekonomijournalist på Svenska Dagbladet.
Ekonomiekot Lördag 9 juni 2012

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Apocalypse Now..Ride Of The Valkyries
http://www.youtube.com/watch?v=Gz3Cc7wlfkI


The Euro’s 11th Hour
The euro zone may find another piecemeal solution and escape the hangman for now, but
unless it attacks its more fundamental problems, it is doomed to a cascading series of crises that will ultimately destroy the common currency.
Steven Rattner, a longtime Wall Street executive and a former counselor to the Treasury secretary, New York Times 8 June 2012

Frustrated, European leaders have descended into the five stages of grief: denial, anger, bargaining, depression and — by some — acceptance that the euro could fall apart

At the heart of the European quandary is the conundrum that ideas that are economically sensible are not politically feasible, while ideas that are politically possible make little economic sense.

Since 2000, wages of German workers have increased barely more than efficiency has grown. Meanwhile, Greece’s unit labor cost (the average cost of labor per unit of output) has increased by roughly 40 percent.

Greece is merely the most disobedient of a passel of problem children; by this all-important measure, the other 15 members are mostly sprinkled closer to Greece than to Germany.

The stronger countries must also accept the need for fiscal transfers — subsidies to poorer euro zone members — just as states like New York pay far more in federal taxes than they get back in services and transfer payments.

The euro zone may find another piecemeal solution and escape the hangman for now, but unless it attacks its more fundamental problems, it is doomed to a cascading series of crises that will ultimately destroy the common currency.

Steven Rattner, a contributing opinion writer, is a longtime Wall Street executive and a former counselor to the Treasury secretary.

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Steven Rattner, Wikipedia

Jag tycker att euron långsiktigt är bra en idé.
Den bygger ett gemenskaptänkande vilket är viktigt i Europa givet vår historiska belastning och bakgrund
Men den blev inte som det var tänkt.
Fredrik Reinfeldt, Ekot Lördagsintervju 9 maj 2012


Europe’s economic outlook and market conditions remain “daunting,”
and without a broader fiscal union the single currency may not survive,
said European Central Bank governing council member Ignazio Visco, who also heads the Bank of Italy
Bloomberg 9 June 2012

European governments need to take “courageous moves towards fiscal and financial union” to break the link between sovereign risk and bank risk, he said.

“Without the design and implementation of appropriate governance arrangements, monetary union is difficult to sustain,” Visco said.

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"I am sure the euro will oblige us to introduce a new set of economic policy instruments.
It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."
Romano Prodi, EU Commission President. Financial Times, 4 December 2001


The equity market seems to be thinking it. The bond market certainly is.
The International Monetary Fund is preparing for it, and voters across bits of Europe are returning politicians who will cause it.

If Spain, Ireland, Greece, Portugal and maybe Italy, broke free (with a combined GDP to rival Germany).
They would enjoy an immediate 30pc cost advantage thanks to devaluation, which would jump start growth
Germany would probably be forced to adopt its own stimulus measures to boost consumer spending at home
A smaller German surplus and more inflation would result, but that's no disaster, even for Germans.
Damian Reece, Telegraph 31 May 2012

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In brief, the eurozone is now on a journey towards break-up
that Germany shows little will to alter

Martin Wolf, Financial Times 29 May 2012


Euro Crisis:
Is the Currency (Finally) Doomed?
So far, the doomsayers have been wrong.
But now we really have to ask if the game is up
TIME 24 May 2012

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Europas politiker har slagit in på en ekonomisk kurs som ser ut att leda mot sammanbrott.
Konsekvenserna riskerar att bli dramatiska.
Huvudargumentet för en europeisk valuta var att den skulle göra krig omöjliga.
Tio år senare har valutasamarbetet lett till motsatsen
Har vi svenskar förträngt hur vi löste vår egen finanskris under 1990-talet?
Peter Wolodarski, DN 27 maj 2012


It probably is about time to judge the euro zone as a failed idea,
As problems mount in the euro zone, it’s increasingly evident that we’ve been witnessing an institutional failure of monumental proportions.
We thus face the danger that the euro, the world’s No. 2 reserve currency, could implode.
Tyler Cowen, professor of economics at George Mason University, New York Times May 26
och Rolf Englund om Mats Johanssons omsvängsledare dag ett SvD, 27 maj 2012


Euron kollapsar i Spanien
Rolf Englund 28 maj 2012

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Bear Stearns, Lehman Brothers and Grexit calls into question
the very existence of the European Monetary Union
John Mauldin, 19 May 2012

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Europe’s hapless politicians, having asserted that exit from the single currency was impossible,
must now claim that exit would be relatively easy.
Only then can they plausibly threaten the Greek electorate with expulsion if they vote the wrong way.
John Kay, Financial Times 22 May 2012


RE: The Ultimate Article about EMU and the Eurocrisis
Time to plan a velvet divorce for the euro
In the coming months, Europe may be forced to decide
Sacrificing national self-rule on the altar of the euro is inherently objectionable
– and would invite a nationalist backlash across Europe.

Gideon Rachman, Financial Times 21 May, 2012

I had written repeatedly that the eurozone was a flawed construction that was likely to collapse. If that was the case, I was asked, would it not be better to break the whole thing up now?

At this point, I heard myself becoming shifty and evasive – “The trouble,” I replied, “is that I keep being told that a break-up would cause a catastrophe. Until I can tell you convincingly why that’s untrue, I can’t responsibly advocate it.”

But prevarication is no longer good enough. In the coming months, Europe may be forced to decide.

It is true that the transition from here to there will be painful and dangerous. My colleague Martin Wolf laid out an updated version of the full horror scenario in Friday’s FT – involving a breakdown of law and order in Greece, and financial collapse across Europe.

How could anyone responsibly run that risk?

The answer is that the alternatives to eurozone break-up are inherently implausible and deeply unattractive.

Without the option of devaluing their currencies, uncompetitive economies are left with “internal devaluation” – otherwise known as wage cuts and mass unemployment.

It is true that countries such as Greece badly need economic reforms. But these reforms – conducted within the straitjacket of monetary union with Germany – are causing political and economic turmoil.

In theory, the eurozone might rectify this error by moving to a real political union.

Even if EU politicians were able to overcome such objections and create a real federal union, this giant new entity would essentially hollow out the powers of national democracies.

Sacrificing national self-rule on the altar of the euro is inherently objectionable – and would invite a nationalist backlash across Europe.

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Internal devaluation

Federalism

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Suddenly, it has become easy to see how the euro
— that grand, flawed experiment in monetary union without political union —
could come apart at the seams.
Things could fall apart with stunning speed, in a matter of months, not years.
Paul Krugman, New York Times 17 May 2012


A Greek exit from the euro area has the potential to be
EU’s most economically and politically destructive event of a generation
Bloomberg Opinon, Editors, May 16, 2012 1:00 AM GMT+0200

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This is the first major revolt by any electorate against the eurozone’s austerity policies,
and it is those policies which have underpinned the willingness of the ECB to use its balance sheet to rescue the banking system.
Gavyn Davies, 16 May 2012

Furthermore, Greece is just the tip of the iceberg. The swing against austerity by voters in the eurozone is manifesting itself in many different places.
I have been wondering whether this is good or bad news for the resolution of the crisis.

Until the end of last year, austerity economics had a surprising amount of political support inside the eurozone, and not just in core countries like Germany.
This was a reflection of a wider international phenomenon.

The UK election in 2010 resulted in a new coalition government which opted for austerity on an accelerated timescale.

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ECB Draghi


ECB has apparently now said that it won't directly lend to some Greek banks that it judges to be technically "insolvent".
That sounds bad, but the banks that have lost access to direct ECB funding can almost certainly still get money from the Greek central bank, which, of course, is ultimately, getting its cash from the ECB
Stephanie Flanders, BBC Economics editor, 17 May 2012 Last updated at 01:08 GMT


David Cameron, Britain’s prime minister, will on Thursday warn that the single European currency could unravel
unless the eurozone’s 17 members move rapidly towards full fiscal and political union.
Financial Times, May 17, 2012 12:01 am


Om att äta kakan, ha den kvar, eller sälja den på kredit till Grekland
Rolf Englund 17 maj 2012


Should France Be Added to the 'PIIGS'?
Hollande’s biggest task could be avoiding the fate of the euro zone’s ailing peripheral states
— the so-called ‘PIIGS’ - Portugal, Italy, Ireland, Greece and Spain
Patrick Allen, CNBC EMEA Head of News, 16 May 2012


The euro currency is a malady that condemns at least a generation of Greeks, Italians, Spaniards, Portuguese and Irish to the economic infirmary.

The economists and politicians who created the system still proclaim it can survive.
Their time would be better spent recognizing they made a bad mistake and preparing for

an orderly dismantling of the euro before the damage spreads and further undermines European unity.
Peter Boone and Simon Johnson, Bloomberg Opinion, 14 May 2012

Peter Boone is a non-resident senior fellow at the Peterson Institute for International Economics, a visiting senior fellow at the London School of Economics and an adviser at Salute Capital Management.
Simon Johnson, a professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics, is co- author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

Today, there are about 8.5 trillion euros ($11 trillion) of sovereign bonds outstanding in the euro area, and more than $180 trillion in derivatives linked to interest rates

These interest-rate derivatives -- known as swaps -- are held by large leveraged financial institutions (banks, hedge funds), or by pension and insurance companies with large, long-term liabilities.

If interest rates rise, bond prices fall, and derivative contracts change in value (good news for people who have hedged into fixed interest rates and a potential disaster for those exposed to rising interest rates).

Is there any hope for the euro dream? One potential way forward would be to create a European- level fiscal union that assumes all national debt, much like what Alexander Hamilton did as first U.S. secretary of the Treasury.

That isn’t going to happen in modern Europe.
Why would German taxpayers and savers agree to pay for the good times previously enjoyed in Greece, Italy or Spain?

Who could even ask them to do so?

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Bör alla avgå? Hur skall eurons Ja-sägare hanera sin besvikelse
Det var ett mycket allvarligt misstag att förespråka en svensk anslutning till EMU.
Rolf Englund 7 maj 2012


After Greek voters rejected austerity in last week's election Europe has been searching for a Plan B
It's time to admit that the EU/IMF rescue plan has failed.
Greece's best hopes now lie in a return to the drachma.

Der Spiegel, Staff, 14 maj 2012

At the Chancellery in Berlin, the television images from Athens now remind Merkel's advisers of conditions in the ill-fated Weimar Republic of 1919-1933.

Back then, the Germans perceived the Treaty of Versailles as a supposed "disgrace." Now, the Greeks feel the same way about the austerity measures imposed by Brussels.

And, as in the 1920s in Germany, the situation in Greece today benefits fringe parties on both the left and the right.

The country's political system is unraveling, and some advisers even fear that the tense situation could lead to a military coup.

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Chancellor Heinrich Bruening’s austerity administration

Freden

Tyskland

EMU Replay of the 30´s


Expelled from the eurozone, Greece might prove more dangerous to the system than it ever was inside it
– by providing a model of successful recovery
Arvind Subramanian, Financial Times 14 May 2012

The writer is a senior fellow at the Peterson Institute for International Economics and author of ‘Eclipse: Living in the Shadow of China’s Economic Dominance’

A substantially depreciated exchange rate would set in motion a process of adjustment that would soon reorientate the economy and put it on a path of sustainable growth.

What is the evidence? Just look at what happened to the countries that defaulted and devalued during the financial crises of the 1990s.

Suppose that by mid-2013 Greece’s economy is recovering, while the rest of the eurozone remains in recession. The effect on austerity-addled Spain, Portugal and even Italy would be powerful. Voters there would not fail to notice the improving condition of their hitherto scorned Greek neighbour.

The ongoing Greek tragedy could yet turn out not too badly for the Greeks.

But tragedy it might well be for the eurozone and perhaps for the European project.

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If the eurozone gives way on /Greece/, what chance would there be of painful austerity being continued,
not just in Greece but also in Portugal, Spain, Italy and Ireland?

The northern countries would face the prospect of pouring money into a bottomless pit.

The big danger for the rest of the eurozone is not that Greece makes a complete horlicks of monetary independence
but rather that it makes a comparative success of it.

The big danger for the rest of the eurozone
Suppose that within a year or so of exit, it looks as though the Greek economy is starting to recover.
How then would the governments of Portugal, Spain, Ireland and Italy persuade their electorates that
there is no alternative to austerity stretching out until the crack of doom?
Roger Bootle, Telegraph 13 May 2012

The game would be up.

Bank deposits would flee from these countries and end up with German banks which, through the Bundesbank, would recycle them to beleaguered banks in the periphery.

In the process, Germany and the other northern countries could end up taking on the risk of the whole banking system of peripheral Europe.

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Greece


"Eurodämmerung"
Paul Krugman skriver att Grekland troligtvis kommer att lämna euron redan nästa månad.
Dagens Industri 14 maj 2012

Eurodämmerung
Paul Krugman, New York Times, May 13, 2012

Some of us have been talking it over, and here’s what we think the end game looks like:
1. Greek euro exit, very possibly next month.
2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

4b. End of the euro.

And we’re talking about months, not years, for this to play out.

Full text hos Dagens Industri

Full text at New York Times

Krugman alltför optimistisk om tidsplanen för Eurodämmerung
Det är väl mer fråga om veckor, dagar eller timmar?
Rolf Englund, 14 maj 2012


De människor som mobbade EU till att anta en gemensam valuta,
de människor som är mobbade både Europa och USA till åtstramning är inte teknokrater.
De är istället djupt opraktiska romantiker.
Så varför drev dessa "teknokrater" på så hårt för euron, och bortsåg från många varningar från ekonomer?
Delvis var det drömmen om ett enat Europa, som kontinenten elit fann så lockande att de viftade undan praktiska invändningar.
Paul Krugman, New York Times, 20 November, 2011


Regeringen bör utlysa nyval
Regeringen, liksom S-ledaren, är för ett svenskt medlemskap i EMU
Den uppfattningen delas av runt tio procent av det svenska folket
Rolf Englund 12 maj 2012


Början på sidan


The political turmoil in the Netherlands has sent a disastrous message that could thwart Merkel's master plan to save the single currency.

If the Dutch with their robust economy aren't willing to observe the 15-year-old rule limiting the budget deficit to 3 percent of GDP,
many are asking, why should other nations such as Greece, Spain, Portugal and Italy, which have far bigger economic problems?

Der Spiegel 24 april 2012


Europe’s Economic Suicide
If European leaders really wanted to save the euro they would be looking for an alternative course.
The Continent needs an announced willingness to accept somewhat higher inflation
budgets in Germany that offset austerity in Spain and other troubled nations rather than reinforcing it.

Even with such policies, the peripheral nations would face years of hard times. But at least there would be some hope of recovery.
Paul Krugman, New York Times 15 April 2012

Spain’s fiscal problems are a consequence of its depression, not its cause.
Nonetheless, the prescription coming from Berlin and Frankfurt is, you guessed it, even more fiscal austerity.
This is, not to mince words, just insane.

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The most likely outcome... German inflation will rise
The dominant German view is that the crisis reflects fiscal indiscipline.
Others insist (rightly) that the core problem was excessive lending, divergent competitiveness and external imbalances.
Martin Wolf, Financial Times 17 April 2012

The political elites of member states and much of their population continue to believe in the postwar agenda, if not as passionately as before.

The most likely outcome... German inflation will rise and its external surpluses fall. Adjustment will occur

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Tyskland

Om man har en sedelpress går man inte i konkurs
It looks increasingly clear that sub-sovereign eurozone borrowers are in a different position from a sovereign country, such as the UK
Martin Wolf, Financial Times 2 February 2012


When the euro was being created, the economics profession split into three groups
-- enthusiasts, opponents and realists -- that predicted wildly different costs and benefits for the project.
By 2007, when the young currency was thriving, the enthusiasts declared a premature victory.
Now it’s the turn of the opponents, and they are, of course, wrong.
I say “of course” because currencies are meant to exist for centuries.
Charles Wyplosz, Bloomberg April 2, 2012

Their performance cannot be judged after five or 15 years. It’s understandable that people who felt a strong prejudice for or against the euro’s existence should feel the itch to make a point when things turn their way, but the point is bound to be misleading, and intentionally so. The reality, however, is that changes in the broad flow of history, which the euro certainly was, require a much longer view.

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There is no provision in any European Treaty for a country to leave the eurozone.
It was intended to make it clear that the eurozone was forever – like the Soviet Union and the Holy Roman Empire.


Minns ni folkomröstningen om EMU 2003,
när Ebba Lindsö försökte övertyga de tvivlande med att det egentligen inte är speciellt svårt att lämna euron?
”Vi kan välja att gå ur. Och en återgång till nationella valutor är rent tekniskt inte särskilt svårt.”
Och detta är väl något som Grekland kan glädja sig åt i dessa dagar. Att det rent tekniskt inte är speciellt svårt att lämna euron.
Mattias Lundbäck, 24 September 2011

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Ebba Lindsö

Martin Sandbu, the economics leader writer for the Financial Times, vad har han att säga?
Först proklarmerar han nejsidans seger i den intellekturella kampen om EMU:
The battle to save the euro is still being fought. But the intellectual battle for the merits of monetary union has been conceded without a shot being fired in its defence.
The euro’s real tragedy is that it has been disowned by its own kin.

Han fortsätter:
It is now a badge of pragmatism to argue that dissolving the monetary union is the best way forward. What do the euro’s defenders respond? That if the euro fails, Europe fails. That letting the euro disintegrate would do more harm than good.
This is both true and important. But to say that we must stick with the euro now that we have come this far, or else all hell will break loose, is to admit that it would be better not to have set out on this route to begin with.

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The Irish left the sterling zone. The Balts escaped from the rouble. The Czechs and Slovaks left each other.
History is littered with currency unions that broke up. Why not the euro?
Had its fathers foreseen turmoil, they might never have embarked on currency union, at least not with today’s flawed design.
Charlemagne, The Economist print 7 April 2012

The founders of the euro thought they were forging a rival to the American dollar.
Instead they recreated a version of the gold standard abandoned by their predecessors long ago.
Unable to devalue their currencies, struggling euro countries are trying to regain competitiveness by “internal devaluation”, ie, pushing down wages and prices.
That hurts: unemployment in Greece and Spain is above 20%.

Common sense suggests that leaders should think about how to manage a break-up. Some may be doing so. But having described a split as bringing economic Armageddon, leaders dare not be seen planning for it.

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Greker, spanjorer, italienare och andra försöker nu ta sig ur det brinnande eurohuset. Detssvärre saknas förberedda nödutgångar.
There is no provision in any European Treaty for a country to leave the eurozone. That was deliberate.
It was intended to make it clear that the eurozone was forever – like the Soviet Union and the Holy Roman Empire... more here

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Euro Was Flawed at Birth and Should Break Apart Now
Charles Dumas, Bloomberg, 2 April 2012
With nice chart about Sweden

Since the launch of the euro in January 1999, Germany and the Netherlands have experienced a growth slowdown and loss of wealth for their citizens that would not have happened had they never joined the euro.

We know this to be true, because we can compare the progress of these two Northern European economies with that of Sweden and Switzerland, which kept their freely floating currencies in 1999 and continued to grow as before.

Charles Dumas writes:

No wonder the Germans and Dutch are angry. But their anger should be directed at the governments that took them into the euro, not at the hapless citizens of Mediterranean Europe, who now are also suffering the effects of the common currency.

Sweden and Switzerland didn’t have to make any such sacrifice of ordinary people’s prosperity, while at the same time they enjoyed stronger employment as well as budget and current-account balances. That leads to only one conclusion: The euro was a mistake from the outset. It should be abandoned in unison and soon.

Källa: Bill Mitchell – billy blog
Modern Monetary Theory … macroeconomic reality

Full text by Carles Dumas at Bloomberg

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News


Nouriel Roubini: markets are “schizophrenic” they cannot decide whether to reward or punish countries such as
Spain and Italy for their austerity plans. “Without growth, the socio-political backlash will become overwhelming for some governments.”
The euro needs to sink to parity with the US dollar in order to restore Europe’s peripheral economies to growth
CNBC 30 March 2012


Hary Flam vill ha lönesänkningar i krisländerna
"Eurokrisen är inte över trots skärpta budgetregler.
Det framkom på en ekonomisk debatt i Europahuset i Stockholm på fredagen"

Europaportalen 23 mars 2012


U.S. Treasury Secretary Timothy Geithner warned heavily indebted countries not to resort to draconian measures to fix their budgets,
according to congressional testimony released on Monday
Reuters, 20 March 2012

"Economic growth is likely to be weak for some time. The path of fiscal consolidation should be gradual with a multiyear phase-in of reforms," Geithner said in remarks prepared for delivery to the House Financial Services Committee on Tuesday.

"If every time economic growth disappoints, governments are forced to cut spending or raise taxes immediately to make up for the impact of weaker growth on deficits, this would risk a self-reinforcing negative spiral of growth-killing austerity," he said.

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Istället för att satsa oss ur kristider innebär arbetslinjen att vi arbetar oss ur de besvärliga perioderna.
Medicinen är något beskare men sockerpiller hjälper bara mot inbillade problem.
SvD-ledare, signerad Maria Ludvigsson, 19 mars 2012


Metoden att genom åtstramningar få budgetbalans kan tyckas vara vad som behövs för de försumliga PIIG:s-länderna. Men oavsett hur illa vi tycker om dessa länders frivola leverne är det inte för att vi känner att det är moraliskt riktigt att sätta strypkoppel på dem som ska avgöra vad som är en riktig ekonomisk politik.

Vi måste tänka på konsekvenserna av en åtstramning i en stor del av Europa.
Det kommer att förvärra och inte förbättra läget.
Nästa år ska Spanien och Italien omsätta lån motsvarande 5 procent av BNP.
Om refinansieringen misslyckas råkar vi in i det scenario som jag skrev om 2/9 2011: en europeisk katastrof.
Och den beror enbart på politisk oförmåga.
Danne Nordling 16 november 2011

Det scenario som jag /Danne/ skrev om 2/9 2011


Euron har redan kollapsat
Rolf Englund blog 17 mars 2012


Eurozone members, stumbling from one crisis to the next,
continue with a project which everyone now essentially knows to be unsustainable
Jeremy Warner, Daily Telegraph, March 16th, 2012

Faced with execution today or execution tomorrow, most people would choose the latter option. Who knows what might happen in between – an amnesty might be declared, the executioner might die. Hope springs eternal.

This way of thinking has come to instruct European attitudes to the euro. Everyone now accepts that the euro hasn't worked out as hoped, but they would rather have it all breakup at some point in the future than face the immediate pain of having it breakup now. It seems unlikely, but you never know, in the meantime things might sort themselves out.

We've just had write-downs on Greek sovereign debt of more than €100bn, and we can be pretty certain there's a lot more of that to come, both from Greece and the rest of the eurozone periphery. Yet perhaps oddly, Germans haven't really noticed it. It all looks like fantasy money which doesn't really affect them.

Meanwhile, the periphery seems to believe the consequences of leaving will be worse than the price paid in never ending austerity of staying in.

And all think the dream of European solidarity and unity still something worth fighting for.

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It’s hard to see how getting European banks to buy bonds from potentially insolvent countries
is going to restore confidence in the system as a whole
Jeremy Warner, DT 1 March 2012

News


Det vi ser är inte primärt en statsskuldskris utan en eurokris som har lett till en statsskuldskris.
De euroländer som idag är i kris är de som skulle ha behövt en mycket stramare penningpolitik under valutaunionens första årtionde.
Men eftersom den största ekonomin, den tyska, behövde mycket låga räntor, var den europeiska centralbanken tvungen att föra en mycket lätt penningpolitik.
Nils Lundgren, 13 mars 2012

Detta ledde till att staten i Grekland, Portugal och Italien lånade upp pengar och finansierade en på sikt ohållbar efterfrågenivå som medförde stigande inflation i priser och löner och därmed obönhörligt sjunkande konkurrenskraft.

I Spanien och Irland var det istället den privata sektorn som lånade för mycket, när räntorna blev så låga.

Effekterna blev desamma. Priser och löner steg snabbare och den internationella konkurrenskraften försämrades kraftigt.

Däremot blev det inte några budgetunderskott och växande statsskulder under processen.

De problemen exploderade först när staten måste gå in och rädda banker samtidigt som efterfrågan säckade ihop och därmed skatteintäkterna samtidigt som utgifterna steg för arbetslöshetsersättning och andra krisåtgärder.

Det vi ser är således inte primärt en statsskuldskris utan en eurokris som har lett till en statsskuldskris.

Valutaunionen var ett mycket riskfyllt projekt som inte borde ha genomförts under detta historiska skede.

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Den hemska sanningen om John Hassler, Göran Persson och kronkursförsvaret
Rolf Englund blog 7 mars 2012

Forskarna kommer att ha till uppgift att förklara hur det kom sig att så många i det ledande skiktet i Europas länder kom att vara för
det redan nu misslyckade fullskaleexperiment, eller rättare sagt vågspel, som EMU och euron innebar.
Rolf Englund blog 4 februari 2012

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News


Kuriosa
Det är inte euron som orsakat krisen.
Det är misskötseln av finanserna i Grekland, Spanien och Portugal
Krisen har inte försvagat eurosamarbetet. Den har stärkt det
Olle Schmidt (FP)


Danne Nordling 12 mars om EEAG, SNS och Spanien
via Rolf Englund blog 18 mars 2012


”Situationen i euroområdet har fått utvecklas till en sådan djup kris att inga enkla lösningar längre finns att tillgå”,
skriver åtta tunga ekonomiska ekonomer i den årliga EEAG-rapporten.
Krisländerna måste ta ner prisnivån i landet så att varor och tjänster blir konkurrenskraftiga. Och därmed få i gång en tillväxt.
Det finns två sätt att göra det på.
– Antingen genom att lämna euron och devalvera eller genom kraftiga fall i löner och priser, sade John Hassler
Leif Petersen, SvD Näringsliv 7 mars 2012

När euron infördes närmade sig obligationsräntorna i eurozonen varandra. På ekonomspråk heter det konvergens.

– Initialt var det bra men utvecklingen gick för långt och riskerna på både mikro- och makronivå undervärderades, sade John Hassler när han presenterade rapporten.

Utvecklingen ledde till snabbt ökande löner och priser i de fattigare länderna. Det betydde att dessa länders exportvaror blev dyrare och de tappade konkurrenskraft.
I rapporten visas att priserna 1995–2008 steg med i snitt 26 procent i eurozonen.
I Tyskland var stegringen 9 procent och i Grekland 67 procent.

Förre finansministern Erik Åsbrink (S) var också en av kommentatorerna. Han varnade för alltför massiva interventioner i krisländerna.
– Det avvärjer en finanskris på kort sikt men kan leda till eurons undergång.

Krisländerna måste ta ner prisnivån i landet så att varor och tjänster blir konkurrenskraftiga. Och därmed få i gång en tillväxt.
Det finns två sätt att göra det på.
– Antingen genom att lämna euron och devalvera eller genom kraftiga fall i löner och priser, sade John Hassler.

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Interndevalvering


John Hassler, EMU, heder, sanning och rätt
I dagens pappersupplaga av SvD Näringsliv citeras han:
"Jag har blivit mer skeptisk till euro-projektet"
Mer skeptisk? Hur skeptisk var han då?

Rolf Englund blog 7 mars 2012

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EEAG och John Hasslers pudel.
My finest hour?
Rolf Englund blog 6 mars 2012

Hassler sade bland annat att det var viktigt när man skulle genomföra åtstramningar och strukturreformer i krisländerna att man hade en story som folket köpte, liksom vid den svenska statsskuldkrisen i början på 1990-talet.
Under frågestunden sade jag att det då inte var någon statsskuldkris. Det var en fastighets- och kostnadskris.
De dåliga statsfinanserna berodde på krisen. Krisen berodde inte på de dåliga statsfinanserna. Det är viktigt att hålla reda på riktningen på orsakssambanden, sade jag, vilket han nog medgav.

Hassler hade i slutet av sitt anförande en liten, liten pudel där han sade att problem hade blivit större och delvis annorlunda (TARGET) än vad han hade förutsett.

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Spreads on Italian bonds have widened to about 200 basis points over German bunds.
The balance-of-payments crisis underway since the first half of 2016 is the main factor
Carmen Reinhart, Project Syndicate 23 November 2016


Furthermore, the ECB should reintroduce the requirement that TARGET2 debts be repaid with gold, as occurred in the US before 1975

The fiscal compact – formally the Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union
French Prime Minister Manuel Valls and his Italian counterpart, Matteo Renzi, have declared – or at least insinuated –
that they will not comply with the fiscal compact to which all of the eurozone’s member countries agreed in 2012
Their stance highlights a fundamental flaw in the structure of the European Monetary Union

– one that Europe’s leaders must recognize and address before it is too late.
Hans-Werner Sinn, Project Syndicate 22 October 2014


Some economists warn that the German central bank faces hidden liabilities of 500 billion euros
in the form of unsettled claims within the European payments settlement system,
and could lose that sum if the euro zone breaks apart.
Der Spiegel 26 March 2012

According to SPIEGEL, the German government has said it sees no such risks. But a Greek euro exit could still cost the German central bank billions.

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We first need to understand the root causes of the crisis.
EU leaders tend to regard it primarily as a public debt crisis, and therefore focus their efforts on strengthening the political constraints on government borrowing.
Others see it simply as a crisis of confidence which can be settled by setting up a rescue fund large enough to convince markets that they cannot undo the euro – a "big bazooka".
Neither of these explanations ring true.

If you mis-diagnose the problem, you are highly likely to prescribe the wrong medicine, which is precisely what is occurring
The bottom line, as brilliantly explained in the European Economic Advisory Group's latest annual report,
is that it is a balance of payments crisis, pure and simple, which the eurozone lacks the adjustment mechanisms to deal with

Jeremy Warner, Daily Telegraph, March 16th, 2012

European Economic Advisory Group's latest annual report

Before the advent of the euro, such imbalances would be corrected through the natural market mechanism of free floating exchange rates.

Actually what's been happening is the exact opposite of what should occur. In terms of their competitiveness, or prices, relative to one another, the surplus countries have been devaluing since the euro came into existence, while the deficit countries have been appreciating.

/RE: Den som först i världen kom på denna lika allvarliga som ofrånkomliga effekt var, osannolikt nog, Stefan de Vylder, som skrev i Göteborgs-Posten 2002-10-22 /

Or as the EEAG Report puts it, "the economies adopting the euro locked themselves into a system with no feasible adjustment mechanism.

As a result of the capital flows the euro triggered, countries in the core of the euro area have run surpluses and have maintained low inflation, and countries outside the core have run deficits, or have large enough debts to be easily pushed into unsustainable macroeconomic dynamics."

German savers are continuing to finance the deficits, in part through the bailout mechanisms which have been put in place, but also through the good offices of the European Central Bank.

It works like this.

...

German banks are suddenly flush with cash... Some of this money is on lent to the German economy, /the rest/ gets deposited with the Bundesbank.
The Bundesbank in turn lends the money to the ECB, which lends it to the Greek Central Bank, which lends it to the Greek commercial banks to repay their German loans.

Quite obviously, this is an unsustainable model. It is simply not viable indefinitely to finance a customer who cannot pay his way. But generally you don't find that out until you demand the money back.

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(ECB) issuing over €1 trillion in short-term loans
What if, instead of holding the European Monetary Union (EMU or Eurozone) together, that actually makes a breakup more likely?
That would certainly fall under the rubric of unintended consequences, and be worth our time to contemplate in this week's letter.
John Mauldin 3 March 2012

The Hundred-Billion-Euro Bomb
Euro-Zone Central Bank System Massively Imbalanced
Der Spiegel, 6 March 2012

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News


Target 2
As of the end of April, net liabilities related to the allocation of euro banknotes were €16.2bn
and the Target 2 balance was negative by about €99bn.
Therefore, the total exposure of the Eurosystem to Greece was around €115bn.
zerohedge 20 June 2015

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Bankrun

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News


The EEAG Report on the European Economy 2012
Chapter 2
The European Balance-of-Payments Problem


Target 2 of the ECB vs.
Interdistrict Settlement Account of the Federal Reserve

Why was ISA not settled in April 2011?
Michiel Bijlsma and Jasper Lukkezen, Eurointelligence 15.03.2012

In the US similar imbalances have arisen since September 2008. Since the beginning of the Fed’s liquidity operations, the New York Fed has accumulated a large positive ISA account, while the Richmond and San Francisco Fed have accumulated a negative ISA account. They are not eliminated either.

But how can this be?
The Federal Reserve accounting manual stipulates that ISA balances should be settled:
Every year in April the average ISA balance over the past 12 months is calculated and netted via transfer of gold certificates between reserve banks.

Why was ISA not settled in April 2011?

Full text here


Repeated rounds of self-defeating austerity have become the order of the day. Still others see the crisis as one of confidence, which can be addressed by setting up a rescue fund large enough to convince markets that they cannot undo the euro – a “big bazooka”. This, too, is just wishful thinking.

The real cause, as long argued by Sir Mervyn King, Governor of the Bank of England, and now accepted by most leading economists, is a simple, old-fashioned balance of payments crisis.
Jeremy Warner Daily Telegraph 12 April 2012


172 German professors can’t be wrong
OR PERHAPS they can.
The most remarkable thing, says one FAZ reader, is that “so many economists could agree on a single text :-) – incredible.”
The Economist, July 6th 2012

A letter from 172 German-speaking economists published by the daily Frankfurter Allgemeine Zeitung (FAZ) lambasts the steps taken towards a banking union by euro-zone leaders at a summit last week in Brussels

It has unleashed a counterblast from government heavyweights and their economic advisers, leaving the public even more confused.

The 172 professors have certainly broken new ground. The most remarkable thing, says one FAZ reader, is that “so many economists could agree on a single text :-) – incredible.”

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Angela Merkel vs. 160 Angry German Economists
Why is Angela Merkel so reluctant to do what it takes to save the euro?
The economists include the president of the influential Ifo Institute for Economic Research Hans-Werner Sinn
Marc Champion, Bloomberg July 5, 2012

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Tyskland


The crucial step is to agree on the nature of the /euro/ illness.
On this, progress is now being achieved, at least among economists.
It is widely accepted that the balance of payments is fundamental to any understanding of the present crisis.
Martin Wolf, FT, April 10, 2012

Indeed, the balance of payments may matter more in the eurozone than among economies not bound together in a currency union.

Hans-Werner Sinn of CESifo, in Munich, has done much to explain, in his words, that “the European Monetary Union is experiencing a serious internal balance of payments crisis that is similar, in important ways, to the crisis of the Bretton Woods System, in the years prior to its demise.”

A special issue of the CESifo Forum, published in January 2012, is dedicated to this theme.

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Can one have balance of payments crises in a currency union?
The answer to this question is an unambiguous “yes”.
The fundamental point was made by the British economist, Tony Thirlwall, in a column entitled
“Emu is no cure for problems with the balance of payments”, in the Financial Times of October 9 1991

Martin Wolf, FT February 16, 2012

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The Hundred-Billion-Euro Bomb
Euro-Zone Central Bank System Massively Imbalanced
Der Spiegel, 6 March 2012

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Target 2
One of the more intriguing recent developments of the eurozone crisis is the shock expressed by
Germany’s economic establishment that the eurozone is, in fact, a monetary union.
Wolfgang Münchau, FT 4 March 2012

The Bundesbank is getting nervous about a counterparty risk if the euro were to collapse suddenly.

So, the two “Target 2” professors deserve credit for explaining the detailed mechanisms of how a monetary union functions in the presence of a broken banking sector.

And they are also right in pointing out that if the euro were to collapse suddenly, Germany could stand to lose a large proportion of its claims – some 20 per cent of gross domestic product.

However, it is hard to understand why everybody feigns surprise at the fact that current account imbalances can be financed indefinitely in a monetary union.

Is this not one of the characteristics that distinguish it from a fixed-exchange rate system?

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(ECB) issuing over €1 trillion in short-term loans
What if, instead of holding the European Monetary Union (EMU or Eurozone) together, that actually makes a breakup more likely?
That would certainly fall under the rubric of unintended consequences, and be worth our time to contemplate in this week's letter.
John Mauldin 3 March 2012


Frankfurter Allgemeine has the scoop of the day.
It has obtained a letter by Jens Weidmann, (president Bundesbank) to Mario Draghi, (president ECB)
warning about Germany’s Target 2 claims,
and proposing a return to the collateral rules before the crisis

Eurointelligence 1 March 2012

This is a hugely significantly development, considering also that the Bundesbank has until recently denied the significance of Germany’s €500bn Target 2 imbalances.

In his letter, Weidmann proposes a securitisation of the ECB’s claims against the weaker central banks in the eurosystem, which have reached a level of €800bn.

The paper says the proposals are bound to trigger a big controversy inside the ECB, and reflects growing concern inside the Bundesbank, whose own Target 2 claims of €500bn are the single largest item of the total.

Weidmann said if these claims were to fall foul, it is possible that the member states may not be able to pay for those losses.

Source: Eurointelligence

Frankfurter Allgemeine

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Hans Werner Sinn, the man who raised the Target 2 debate, writes in Frankfurter Allgemeine about how to fix the Target 2 imbalances.

He said Europe’s south-west is now financing its persistent current account deficits through the money presses, as central banks now provide unlimited liquidity to the banking sector.

That money, thus created, flows to Germany, where ends up at the Bundesbank as a claim against the eurosystem. He compares the Target 2 balances to equivalent balances in the US, which are much lower, which he says is due to different rules under which the system there operates.

He proposes to create covered bonds – securities on property and other assets – created by the eurosystem to redeem the Target 2 imbalances.

Source: Eurointelligence


Capital flight
Foreign banks have essentially stopped loaning money to banks in countries like Greece and Portugal,
the payment system among European central banks known as TARGET2.
Whereas the German TARGET2 balance is some €500 billion in the black, Greece has a deficit of €100 billion,
while Italy and Spain each face an imbalance of €200 billion /1.760 miljarder kronor/.
Der Spiegel 29 February 2012

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"A Primer on the Euro Breakup: Default, Exit and Devaluation as the Optimal Solution."
Orderly defaults and debt rescheduling coupled with devaluations are inevitable and even desirable.
In 1993 Czechoslovakia broke up into two separate states.
Jonathan Tepper via John Mauldin, 27 February 2012

Tepper reminds us that "during the past century sixty-nine countries have exited currency areas with little downward economic volatility."

He makes the case that "The mechanics of currency breakups are complicated but feasible, and historical examples provide a roadmap for exit."

The real problem in Europe, he says, is that "EU peripheral countries face severe, unsustainable imbalances in real effective exchange rates and external debt levels that are higher than in most previous emerging market crises."

The way through?

"Orderly defaults and debt rescheduling coupled with devaluations are inevitable and even desirable. Exiting from the euro and devaluation would accelerate insolvencies, but would provide a powerful policy tool via flexible exchange rates. The European periphery could then grow again quickly with deleveraged balance sheets and more competitive exchange rates, much like many emerging markets after recent defaults and devaluations (Asia 1997, Russia 1998, and Argentina 2002)."

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The greatest threat to the euro is that Greece will make a success of default and devaluation.
Suppose that once the new drachma has fallen by 30pc to 50pc, Greece begins to show signs of growth.
How would it then be possible to persuade the electorate of Spain, Portugal, Italy, and even Ireland, that there is no alternative to years of misery?
It is all very well building firewalls to stop financial contagion, but how do you build firewalls around the voters?
Roger Bootle, Daily Telegraph 26 February 2012

According to last week's plan, by 2020 the ratio of Greek national debt to GDP will be down to 120.5 procent.
Anyone who is forecasting a debt ratio down to the nearest 0.5pc in 2020 is trying to fool either us or themselves.

/RE: Man brukar säga att ekonomer använder decimaler i sina prognoser för att visa att dom har humor./

Since the beginning of 2008, Greek real GDP has fallen by more than 17pc. On my forecasts, by the end of next year, the total fall will be more like 25pc. Unsurprisingly, employment has also fallen sharply, by about 500,000, in a total workforce of about 5 million. The unemployment rate is now more than 20pc.
A 25pc drop is roughly what was experienced in the US in the Great Depression of the 1930s.

So what's the escape route?

Greece suffers from both heavy indebtedness and a lack of competitiveness. Attempts to cut back on the debt by austerity alone will deliver misery alone. Only measured austerity combined with economic growth offers a way out. But while Greece is so uncompetitive it is difficult to see where growth will come from.

The solution offered by Germany and its allies is that austerity will lead to an internal devaluation, i.e. deflation, which would enable Greece gradually to regain competitiveness.

Yet this proposed solution is a complete non-starter. If austerity succeeds in delivering deflation, then the growth of nominal GDP will be depressed; most likely it will turn negative. In that case, the burden of debt will increase.

The only way out of this mess is a combination of default and devaluation, which can accomplish in a flash what it would take many years or even decades of deflation to achieve.

Why can't the European political class that got us into this unholy mess see this?

In my view, the greatest threat to the euro is that Greece will make a success of default and devaluation. Something like it has happened several times before, notably with Argentina in 2002, when it defaulted and devalued. The country went from an appalling financial crisis to growing by 11pc in the space of 18 months.

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Leaders of the euro area’s wealthier nations are increasingly raising a provocative question:
Might the common currency now be strong enough to end the bailout agony and let Greece go?
The short answer is no. In fact, the euro area is probably more vulnerable to a Greek disaster than ever.
Bloomberg editorial, Feb 20, 2012

The improvement, though, is largely cosmetic. The ECB has brought down bond yields by offering banks a no-brainer trade: Buy European government bonds yielding more than 5 percent with money borrowed from the central bank at a rate of 1 percent. The resulting demand from banks has buoyed bond prices and helped Spain and Italy issue more new debt. It also leaves financial institutions -- and the ECB itself -- more exposed to losses in the event of sovereign defaults or renewed market turmoil.

Either way, the trend reflects just how fragile the euro area has become. If investors and regular account holders already see a difference between a euro deposited in Italy and a euro deposited in Germany, there’s a real danger that Greece’s withdrawal from the common currency would trigger bank runs and freeze government-debt markets.

Should an economy as large as Italy, Spain or even France come under attack, the question wouldn’t be whether German taxpayers want to pay for a bailout, as is the case for Greece, but whether they are able to.

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A spectre is haunting Europe: disorderly default
FT 17/2 2012


Why Greece and Portugal ought to go bankrupt
Wolfgang Münchau, Financial Times 12 February 2012

Two years ago, most European policymakers still believed that Greece would pull through.

They lacked experience in managing financial crises. They did not even consult with policymakers in other parts of the world who had dealt with crises in previous decades.

Armed with ignorance and arrogance, they ended up repeating everyone else’s mistakes.

They thought they were clever when they came up with the idea of an expansionary fiscal contraction.

And they thought that a voluntary private sector involvement (PSI) could really help.

In some northern European capitals, policymakers are beginning to understand that the Greek programme has been an unmitigated failure.

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European Doubts Growing over Greece Debt Strategy
Austerity is merely driving the country deeper into economic despair.
Is it time for a radical rethink? Many think the answer is yes.
Der Spiegel Staff, 13 February 2012

Europe is now paying the price for the inability of its leaders -- together with the International Monetary Fund (IMF) and its managing director Christine Lagarde -- have still not been able to agree on effective therapy for improving Greece's economic health.

They share the belief that, given the unforeseeable consequences, a Greek exit from the euro zone should be avoided at all costs. But it remains unclear how the highly indebted country can be nursed back to health within the currency union.

The agreement means that private creditors will have to write down between 70 and 75 percent of their claims. In exchange, they will receive new bonds with longer maturity periods and significantly lower yields. The new bonds will be guaranteed by the euro backstop fund, which provides added incentive for creditors to participate in the swap.
Yet it remains unclear whether a sufficient number of investors will ultimately go along with the deal. Only if 90 percent of private bond holders agree to participate will Greece be able to hit its target of €100 billion in debt relief. Financial insiders claim that the biggest resistance to the swap continues to come from hedge funds. They have insured themselves against a Greek insolvency and would actually profit should it come to pass.

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On Friday, German commentators argue that it is time for EU politicians to face the truth about the situation
- and accept that Greece will either have to default or leave the common currency
Der Spiegel, Friday 10/2 2012

The Financial Times Deutschland writes:
"Greece is currently trying to do something impossible: which is to reform the economy in the midst of a deep depression. That simply doesn't work."

The conservative Die Welt writes:
But the pictures of the demonstrations and the burning German flags show that they didn't reckon with the Greek population. Ultimately, the crucial thing is not the politicians' willingness to carry out reforms … but the will of the people. And the Greeks seem unwilling and unable to accept, for the sake of the stability of the single currency, cuts that go far beyond what we in Germany have ever experienced in terms of austerity measures

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Brüning

Merkel: I Won't Take Part In Pushing Greece Out Of Euro

Greece


Mr Cameron, The Prime Minister, said he believed the ''most likely outcome'' was that the euro would hold together, despite the current debt crisis.
But he stressed that in the longer term it was essential to address the ''fundamental competitiveness divide'' between the powerful German economy
and the weaker southern states.
Daily Telegraph, 9 Jan 2012

"You can't have a single currency with those fundamental competitiveness divides unless you have massive transfers of wealth from one part of Europe to another."

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Calmfors pekar på Eurokrisens huvudproblem,kostnadsläget
Rolf Englund blog 2011-09-13


The Budapest government saw borrowing costs soar and the currency plunge as traders bet that international authorities may abandon Hungary,
letting it become the first European Union country to default on its debts.
Louise Armitstead, Daily Telegraph, 4 Jan 2012

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Workers of Europe unite, you've only euro chains to lose
Comrades across Europe, come over to the eurosceptic side.
Ambrose Evans-Pritchard, 18 December 2011

Almost 97pc of the European Union’s population is now governed by conservative or Right-leaning coalitions, or EU-imposed mandarins. All that is left to social democrats is Austria (8.4m), Denmark (5.5m), and Slovenia (2.1m).

The whole machinery of the European Union (EU) system is under the control of the Right, with variants of Rhenish corporatism in the Council, and pre-modern Hayekians at the European Central Bank (ECB). Whether you regard this Hegelian ascendancy as good or bad, it certainly has profound consequences.

For just as former Prime Minister Margaret Thatcher protested at Bruges that “we have not successfully rolled back the frontiers of the state in Britain, only to see them reimposed at a European level”, the Left might equally protest that they have not fought the long, hard struggle for worker rights in their own democracies to see social welfare rolled back by Brussels and Frankfurt.

The 26 states that went along with this Merkel plan have given up the right to pursue counter-cyclical Keynesian stimulus, and have agreed to do so in perpetuity since it is almost impossible to repeal EU “Acquis”.

Personally, I am not a Keynesian – nor are many Daily Telegraph readers – but this strikes me as a mad commitment to make. For the Left it is surely an unmitigated disaster. They cannot pursue their economic agenda ever again.

Yet there is another parallel of equal resonance: the election of the Front Populaire in France with Communist support in May 1936, the cathartic rejection of deflation policy. Whether or not Leon Blum privately wanted to leave the Gold Standard – that inter-war replica of Europe’s unemployment union – the logic of his policies forced the outcome. Orthodoxy was overthrown.

The question for today’s Left is whether it is in their interests to keep apologising for an EU monetary regime that has pushed the jobless rate for youth to 49pc in Spain, 45pc in Greece, 30pc in Portugal and Ireland, 29pc in Italy and 24pc in France – yet 8.9pc in undervalued Germany – and that offers no credible way out of the slump for the Southern half.

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LO

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A constitutional and economic monstrosity
UK’s behaviour took attention away from the failure of the eurozone’s leaders to devise a credible remedy for the ills of the currency union.
They propose, instead, to tighten the screws on fiscal deviants. It may feel good. But it will not work.
Martin Wolf, Financial Times, December 13, 2011

What is the Commission going to do if they still fail to comply? Take them over? The answer, we now know, is: yes. This is a constitutional monstrosity.

Still more important, as professor Kevin O’Rourke of Oxford university argues on Project Syndicate, is that it is also an economic monstrosity.

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Europe's common currency actually has two gigantic problems.
The euro-zone's other, barely mentioned but huge problem is competitiveness.
It's far more basic and looks less solvable than the sovereign debt problem.
Allan S. Blinder, a professor of economics and public affairs at Princeton University,
and a former vice chairman of the Federal Reserve, Wall Street Journal, 13 december 2011

First, the immediate problem.

The euro was an audacious venture that put the cart before many horses. The fundamental problem is that the euro zone is not a country. Initially 11, and now 17, sovereign nations signed up for a currency union without first homogenizing their budget policies, their tax systems, their bank regulations or much else.

Normally, a weak economy has three ways to fight back.

It can loosen monetary policy, it can loosen fiscal policy, or it can let its currency depreciate. (If the currency is floating, the market will do this automatically.)

But membership in the euro zone forecloses two of these escape hatches, leaving only fiscal policy.

And once a member country stretches its borrowing capacity to the limit—as Greece did—that route is closed, too.

Then what happens?

One answer is playing out now as a Greek tragedy:

You have a depression. And if neither monetary stimulus, fiscal stimulus, nor currency depreciation is possible, when does this depression end?

In the latest summit agreement, reached last Friday, all 17 euro-zone countries, plus several others, pledged to pursue fiscal discipline—with tighter enforcement than previously. But that agreement is more about forestalling future crises than curing the present one.

The debt and banking crisis hogs all the attention because of its immediacy, plus the high drama of all those summit meetings.

But the other, slower-acting problem — lopsided competitiveness within the euro zone — is far more intractable.

To see why, remember the two fundamental determinants of exchange rates:

(1) productivity in different countries—so, other things equal, faster productivity growth should lead to a rising exchange rate; and
(2) prices and wages in different countries—so lower inflation should lead to a rising exchange rate.

Thus, for a currency union to succeed, its member nations need to register approximately equal productivity growth and approximately equal wage and price inflation.

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Grekland


The eurozone deal will fail
because it offers no explanation of how, precisely, the German current account surplus will be recycled
if the southern European nations head down the path of fiscal righteousness.
Stephen King, Financial Times, 12 december 2011
Stephen King is group chief economist at HSBC and the author of Losing Control (Yale)

Last year, Germany ran a balance of payments current account surplus of 5.7 per cent of gross domestic product, even bigger than China’s, which stood at 5.2 per cent of GDP.

These surpluses need to be recycled somewhere else in the world. A current account surplus, after all, represents no more than an excess of domestic savings over domestic investment.

A country running a current account surplus must, by definition, be acquiring foreign assets. Yet, in doing so, it may add to cross-border economic problems.

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Kommentar av Rolf Englund:
Sveriges bytesbalansöverskott var år 2010 större än Tysklands - 6,7 procent enligt Ekonomifakta

Rebalancing


It would be Europe’s worst nightmare: after weeks of rumors,
the Greek prime minister announces late on a Saturday night that the country will abandon the euro currency and return to the drachma.
Soon, the country’s international credit lines are cut after Greece, as part of the prime minister’s move, defaults on its debt.
As the country descends into chaos, the military seizes control of the government.
New York Times, December 12, 2011

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Grekland


Nils Lundgren:
Dagens Nyheter om eurokris, teknokrati och demokrati
Rolf Englund blog 8 december 2011


Europakten räddar inte Italien från bankrutt
Det är olycksbådande att höra Angela Merkel uttala sig efter EU-toppmötet
Det nya fördragets text blir klar i mars.
Hon fick frågan: "Vad händer då med Portugal, Spanien och Frankrike fram till dess?"
Danne Nordling, 9 december 2011

Är Merkel onykter eller har översättaren inte begripit vad hon sade? Trots att den frågande journalisten bjöd på att inte ta upp Italien, som är det mest akut utsatta landet, ville Merkel inte ens låtsas att hon hade en synpunkt på det kortsiktiga problemet med Portugal mfl.

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Traders are asking a more mundane question:
“Has it /EU summit/ done enough to get us through to Christmas?”
Their answer: probably not.
John Authers, Financial Times, December 9, 2011

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Two decades to the day after the Maastricht Treaty was concluded, the EU's tectonic plates have slipped
momentously along same the fault line that has always divided it — the English Channel
The Economist, 9 December 2011

Confronted by the financial crisis, the euro zone is having to integrate more deeply, with a consequent loss of national sovereignty to the EU (or some other central co-ordinating body); Britain, which had secured a formal opt-out from the euro, has decided to let them go their way.

Whether the agreement does anything to stabilise the euro is moot. The agreement is heavily tilted towards budget discipline and austerity. It does little to generate money in the short term to arrest the run on sovereigns, nor does it provide a longer-term perspective of jointly-issued bonds. Much will depend on how the European Central Bank responds in the coming days and weeks.

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Of the nine other EU countries outside the euro, Hungary, the Czech Republic and Sweden
have said they must consult their parliaments.

Six others - including Denmark, Poland and Latvia - have agreed to join the new deal.
BBC 9 December 2011

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News


Content of Merkozy proposal
Eurointelligence 6 dember 2011

Automatic sanctions. In case of non-compliance with the deficit rule, countries are subject to automatic sanctions, which will require a majority of 85% to overturn.
Golden Rule: All EU member states, but in particular the eurozone, should subject themselves to uniform debt limits. The ECJ will adjudicate in case of a dispute, and should have the right to declare national budgets illegal.
Private Sector Participation will follow the rules of the IMF. The PSI agreement on Greece remains valid, but is a unique case that should not be repeated;
Germany and France want the ESM to start end-2012.
The heads of state and government meet once a month as the eurozone’s economic government.
There shall be no eurobonds.
The negotiations about the treaty should concluded end March.


How to Forge a Common European Identity
Der Spiegel 2 december 2011


Events on the Continent have come to feel much like the drift into war.
There is a feeling of powerless inevitability about it.

Jeremy Warner, 1 Dec 2011

Crisis summits come and go with no resolution in sight, but there's always the next one to set the world to rights, though we all know that in truth it won't.

Markets and politicians cling to the belief that in the end, the single currency won't be allowed to fail. The economic and financial consequences are thought too awful to allow for such an outcome. Yet as long as the eurozone's creditor nations continue to adopt their "can pay, but won't pay" approach to the crisis, it is hard to see how it can end in any other way.

Europe is already back in the midst of a credit crunch, with its banks largely frozen out of wholesale funding; eurozone banks have become so risk averse that they prefer to lodge their excess liquidity with the European Central Bank than lend to each other. Across the Continent, banks are shrinking their credit.

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Doom

The long shadow of the 1930s
Could things go bad again?
I mean really bad – Great Depression bad, world war bad?
The kind of cataclysmic event my generation has learned to think belongs only in the history books.
Gideon Rachman, Financial Times, November 28, 2011

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News


This time they may save the euro
Mr Monti’s appearance on the scene has made possible a deal that would see
Germany underwrite the weaker eurozone economies
in return for political commitments to put their national finances in order.
Philip Stephens, Financial Times, December 1, 2011

Germany huddles in the shadow of its experience during the 1930s and has been paralysed by an obsession with moral hazard.

On the other side of the debate, the governments under siege from the bond markets know that at some point fiscal austerity becomes a self-defeating strategy.

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Comment by Rolf Englund
"This time is different"


Bank of England Governor Sir Mervyn King
Banks should brace themselves to withstand the "extraordinarily serious and threatening" economic situation
Eurozone crisis was the biggest threat to the UK's banking system.
King said the Bank itself was making "contingency plans" in case of a eurozone break-up.
BBC 1 December 2011

Some bankers argue that tighter capital requirement rules mean lower lending, as banks are forced to hang on to assets as a contingency, rather than pass it on to borrowers.

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News


Central bank deal should remind eurozone leaders of looming disaster
The warning signs of an impending European banking collapse, which would have global implications, cannot be ignored any longer.
Damian Reece, Head of Business, Dainly Telegraph 11:01PM GMT 30 Nov 2011

Eurozone money supply has been contracting recently in an eerie echo of the events contributing to the 1930s Depression

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One possibility would be to guarantee financing of rollover of public debts and fiscal deficits
for Italy, Spain and Belgium for 2012 and 2013. That would cost up to €1,000 bn
Martin Wolf, Financial Times, 29 November 2011

... though even this might be insufficient to arrest the contagion

The world has reached a new and potentially even more devastating stage of the financial crisis that emerged in the advanced countries in the summer of 2007.
Its epicentre is the eurozone.

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1000 miljarder euro är väl mycket pengar?
Rolf Englund blog 30 november 2011

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News


For Europe, a Lehman Moment
The world can't wait for architects to draw up plans for a new and improved Europe.
David Wessel, The Wall Street Journal's economics editor, 1 December 2011

Europe in 2011 differs from the U.S in 2008. The American union was solid in 2008, the survival of its currency unquestioned. Europe more closely resembles the U.S. in 1777-89 under the Articles of Confederation, the flawed compromise between centralization and decentralization that gave way to the Constitution and a stronger federal government.

Already, European banks—having trouble borrowing in dollars, facing higher capital standards, holding government bonds that may not be worth their value on the books—are dumping assets and pulling back from emerging markets.

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Lehman Brothers


The fiscal solution
Europe's "Hamiltonian moment"
Buttonwood, The Economist, Nov 29th 2011

THERE is a new note from Arnaud Mares of Morgan Stanley about what he calls Europe's "Hamiltonian moment" after the point when Alexander Hamilton committed the US federal government to assume the debts of the individual states.

The voters, What if they reject fiscal control in a referendum? History suggests they will be asked to keep voting until they give the "right" answer with complete financial meltdown for those who get it wrong.

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Alexander Hamilton (January 11, 1755 or 1757[1] – July 12, 1804) was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury.
Wikipedia


The euro zone's 17 finance ministers converged on EU headquarters Tuesday in a desperate bid to save their currency
— and to protect Europe, the United States, Asia and the rest of the global economy from a debt-induced financial tsunami.
CNBC, 29 November 2011

The ministers were discussing ideas that only weeks ago would have been taboo:
countries ceding fiscal sovereignty to a central authority,
an elite group of euro nations that would guarantee one another's loans but require strong fiscal discipline from members.

Cataclysm

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Investors need to prepare for three possible outcomes to the European debt crisis,
including the worst-case scenario in which the monetary union is left in tatters,
Pimco's Mohamed El-Erian, the co-CEO of the the world's largest bond fund manager
CNBC, 29 Nov 2011

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'Germany As Isolated on Euro as US Was On Iraq'
Market participants and EU politicians are starting to sound more apocalyptic in their warnings about the euro crisis
as yet another make-or-break summit, on Dec. 8 and 9, draws near.
Meanwhile the pressure on Germany to drop its opposition to euro bonds or a massive intervention in bond markets by the European Central Bank is intensifying by the day
. Der Spiegel, 29 November 2011


One striking feature of the euro crisis is how fast the unthinkable has become mainstream.
Until the Cannes summit a month ago, a euro-zone breakup was considered a tiny probability.
Now every investor is discussing the implications of a possible breakup.
Simon Nixon, Wall Street Journal, 29 November 2011

Last week, the U.K. Financial Services Authority publicly advised banks to draw up contingency plans.

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News


- Germany is the only country in Europe that can act to save
the eurozone and the wider European Union from “a crisis of apocalyptic proportions”
The Polish foreign minister, Financial Times, November 28, 2011

The extraordinary appeal by Radoslaw Sikorski, delivered in the shadow of the Brandenburg Gate in the German capital, came as the Organisation for Economic Co-operation and Development called on European leaders to provide “credible and large enough firepower” to halt the sell-off in the eurozone sovereign debt market, or risk a severe recession.

Sikorski is married to American journalist and historian Anne Applebaum.

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Euro Zone on the Brink - A Continent Stares into the Abyss
Fear is spreading through the financial markets as investors pull their money out of the crisis-stricken euro-zone countries.
With Chancellor Angela Merkel opposed to using the ECB's firepower to solve the crisis, the monetary union appears increasingly in danger of breaking apart.
Some economists are even arguing for Germany to reintroduce the deutsche mark.
Der Spiegel, Staff, 28/11 2011

Investors have lost confidence in the euro-zone countries and in their ability to rescue the common currency. Not even the recent changes of government in Italy, Greece and Spain have been enough to persuade them otherwise.

There is a growing sense of fear, both in the financial markets and in government offices. Even serious bankers who exude confidence in public admit privately that the monetary union could soon fall apart.

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The long shadow of the 1930s
Could things go bad again?
I mean really bad – Great Depression bad, world war bad?
The kind of cataclysmic event my generation has learned to think belongs only in the history books.
Gideon Rachman, Financial Times, November 28, 2011

Since the collapse of Lehman Brothers in 2008, we have discovered that things can definitely get worse. The question is how much worse?

The risk of a grave economic crisis in Europe is severe.

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Doom - Cataclysm

"Men EMU är i alla fall bra för freden"


The eurozone has 10 days at most.
If the European summit could reach a deal on December 9 the eurozone will survive.
If not, it risks a violent collapse.
Even then, there is still a risk of a long recession, possibly a depression.
Wolfgang Münchau, Financial Times 27/11 2011

I have yet to be convinced that the European Council is capable of reaching such a substantive agreement given its past record.

Of course, it will agree on something and sell it as a comprehensive package. It always does.

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Breaking up is hard to do
It has suddenly become respectable to ask the question: what would happen if the euro broke up?
Gavyn Davies, Financial Times, November 27, 2011


The people who bullied Europe into adopting a common currency,
the people who are bullying both Europe and the United States into austerity aren’t technocrats.
They are, instead, deeply impractical romantics.
So why did those “technocrats” push so hard for the euro, disregarding many warnings from economists?
Partly it was the dream of European unification, which the Continent’s elite found so alluring that its members waved away practical objections.
Paul Krugman, New York Times, November 20, 2011

And the things they demand on behalf of their romantic visions are often cruel, involving huge sacrifices from ordinary workers and families.
But the fact remains that those visions are driven by dreams about the way things should be rather than by a cool assessment of the way things really are.

To save the world economy we must topple these dangerous romantics from their pedestals.

The truth is that Europe’s march toward a common currency was, from the beginning, a dubious project on any objective economic analysis.
The continent’s economies were too disparate to function smoothly with one-size-fits-all monetary policy, too likely to experience “asymmetric shocks” in which some countries slumped while others boomed. And unlike U.S. states, European countries weren’t part of a single nation with a unified budget and a labor market tied together by a common language.

Let me single out in particular the European Central Bank (E.C.B.), which is supposed to be the ultimate technocratic institution, and which has been especially notable for taking refuge in fantasy as things go wrong. Last year, for example, the bank affirmed its belief in the confidence fairy — that is, the claim that budget cuts in a depressed economy will actually promote expansion, by raising business and consumer confidence. Strange to say, that hasn’t happened anywhere.

So am I against technocrats? Not at all. I like technocrats — technocrats are friends of mine. And we need technical expertise to deal with our economic woes.
But our discourse is being badly distorted by ideologues and wishful thinkers — boring, cruel romantics — pretending to be technocrats.

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Federalism

News


Italian bond yields rise above 8%
So-called “real money” managers – including pension funds and insurers – as well as banks have already begun
offloading their holdings of “peripheral” European debt.
Financial Times, November 25, 2011


With the replacement of Zapatero's Socialist party by Rajoy's conservative Popular Party,
all the governments in office in the PIGS — Portugal, Ireland, Greece and Spain — have been turned out.
Irwin Stelzer, WSJ, 21 Nov 2011

The assured election of Mr. Rajoy's PP could not bring the rate Spain had to pay for 10-year money last week below an unsustainable 7%.

Nor does anyone believe that Lucas Papademos, the economist who now heads the Greek government, can do anything other than preside over a default, orderly if possible, disorderly if necessary.

The EFSF pop gun has not been converted into the "big bazooka" needed to back up the more than €I trillion Spain and Italy will have to borrow in the next three years.

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Eurojättar varnar för total valutakollaps
Ekot 25/11, 18:35, med fin bild

Krisen inom eurozonen accelererade ytterligare i dag. Räntorna på lån till Italien har nått ohållbara höjder. Och i eftermiddag varnade Tysklands förbundskansler Angela Merkel och Frankrikes president Sarkozy, för att en skuldkollaps i Italien skulle leda till "slutet för euron".

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Ekot 25/11 2011

Ekot


Death of a currency as
Eurogeddon approaches
It's time to think what hitherto markets have regarded as unthinkable – that the euro really is on its last legs.
Jeremy Warner, DT 24 Nov 2011

The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK.

Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency.

In recent days, it has become plain as a pike staff that the lady's not for turning.

Suddenly, no-one wants to hold euro denominated assets of any variety, and that includes what had previously been thought the eurozone safe haven of German bunds.

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Earlier by Jeremy Warner

Armageddon at Parthenon?
The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading.
Ambrose Evans-Pritchard 28 Jan 2010

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Is this really the end?
Unless Germany and the ECB move quickly, the single currency’s collapse is looming
The Economist print Nov 26th 2011

The latest example is Spain. Despite a sweeping election victory on November 20th for the People’s Party, committed to reform and austerity, the country’s borrowing costs have surged again.

The panic engulfing Europe’s banks is no less alarming. Their access to wholesale funding markets has dried up, and the interbank market is increasingly stressed, as banks refuse to lend to each other.

Firms are pulling deposits from peripheral countries’ banks. This backdoor run is forcing banks to sell assets and squeeze lending;
the credit crunch could be deeper than the one Europe suffered after Lehman Brothers collapsed.

Germany, still fretful about turning a currency union into a transfer union in which it forever supports the weaker members, has dismissed the idea.
This attitude has to change, or the euro will break up.

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Funding


The crisis in the euro area is turning into a panic and dragging the zone into recession.
The risk that the currency disintegrates within weeks is alarmingly high
The Economist, print Nov 26th 2011

The intensifying financial pressure raises the chances of a disorderly default by a government, a run of retail deposits on banks short of cash, or a revolt against austerity that would mark the start of the break-up of the euro zone.

Consider the three ingredients for recession: a credit crunch, tighter fiscal policy and a dearth of confidence.

In aggregate, European banks’ loans exceed their deposits, so they rely on wholesale funds — short-term bills, longer-term bonds or loans from other banks — to bridge the gap.

But investors are becoming warier of lending to banks that have euro-zone bonds on their books and that can no longer rely on the backing of governments with borrowing troubles of their own.

Long-term bond issues have become scarce and American money-market funds, hitherto buyers of short-term bank bills, are running scared.

Have a nice day and read full text here

Funding

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Markets and the euro 'end game'
Stephanie Flanders, BBC Economics editor, 24 November 2011


(Reuters) - Riot police shielded Greece's national parliament Sunday

as demonstrators gathered to protest against austerity measures on the eve of talks in Brussels on a 130-billion-euro ($171 billion) bailout

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The euro is a macro-economic weapon of mass destruction - it simply must be defused.
Should Germany sanction the European Central Bank to guarantee the sovereign debts of all ?
These are the questions that the cheer-leaders of “fiscal union” need to answer.
Liam Halligan, DT, 19 Nov 2011

Berlin doesn’t know what to do.

The world’s financial markets, the British and American governments, and practically every non-German eurozone politician, are united. They’re watching and waiting, convinced that Merkel will eventually relent.

The job of any central bank, the ECB included, is to act as “lender of the last resort” to commercial banks in its jurisdiction that are solvent, but in need of temporary liquidity.
Central banks aren’t meant to dish-out free money to governments that have spent themselves into insolvency.

Are all these countries, their electorates supplicant, their future politicians content, really going to subscribe to and live under, for decades to come, a system based on Berlin telling them how much they can borrow and spend?

How long before new, more extreme politicians come to the fore, pandering to base human prejudice? How long before a system that’s supposed to promote free trade and European co-operation ended up, instead, promoting protectionism, hatred and conflict?

These are the questions that the cheer-leaders of “fiscal union” need to answer.

“Fiscal union” advocates will also need, when the time comes, to send out the eurozone riot-police.
Voters get angry, and sometimes violent, when their own politicians let them down.
But when they feel controlled and humiliated by foreigners, they become totally enraged. That, I’m afraid, is the undeniable lesson of history.

How much louder do the alarm bells need to ring before time is called on this absurd monetary experiment?

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Varför är Sverige en fiskal union?
Rolf Englund blog

Lender of last resort

Federalism

Freden

Tyskland

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Conspiracies, Coups and Currencies
The inhabitants of Italy and Greece, who have just watched democratically elected governments toppled by pressure from
financiers, European Union bureaucrats and foreign heads of state, it evokes the cold reality of 21st-century politics.
Democracy may be nice in theory, but in a time of crisis it’s the technocrats who really get to call the shots.
National sovereignty is a pretty concept, but the survival of the European common currency comes first.
Ross Douthat, New York Times, November 19, 2011

Stability would be achieved at the expense of democracy: the rituals of parliaments and elections would endure, but the real decision-making power would pass permanently to the forces represented by the so-called “Frankfurt Group” — an ad hoc inner circle consisting of Germany’s Angela Merkel, France’s Nicolas Sarkozy and a cluster of bankers and E.U. functionaries, which has been spearheaded European crisis management since October.

One could argue that the Greeks and Italians — and the Spanish and the Irish and everyone else — should have known what they were signing up for when they joined the euro in the first place

But the fact is that the project of European union has never enjoyed deep popular support. Its advocates were always adept at re-running referendums until the vote came out their way, or designing treaties that bypassed the voting public entirely.

The people of Europe have always been wary of trading their sovereignty for ever-greater unity — and now we can see why.

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Federalism


The longer the financial crisis in Europe drags on, the greater the risk of a European economic collapse
with substantial additional negative spillover effects on the United States and the rest of the global economy
.
John H. Makin, American Enterprise Institute, October 31, 2011

The financial crisis in Europe has resulted from the attempt to impose a single money on such disparate economies as Germany and Greece.
Europe’s single currency regime has meant that Greece — along with some other European countries—has borrowed more than it can repay.
With European banks and even the European central banks holding large amounts of risky sovereign debt, financial sector risks have risen to a point where they are harming economic growth.
John H. Makin, American Enterprise Institute, October 31, 2011

So far the approach to Europe’s debt crisis has been to have richer countries—essentially Germany—lend more to Greece so it can continue to service its debt. However, the condition for such aid has been sharp fiscal retrenchment in Greece, which has caused the economy to collapse and created the riots being seen in news media.

Better to recognize that Greece is insolvent, write down its debt, and contain the crisis there than to keep supplying Greece with the funds to service an ever-increasing level of debt. While not a pleasant outcome, such decisive steps could help to keep Greece’s debt crisis from spreading even further — to Portugal, Spain, and Italy — and thereby threatening to precipitate a European economic collapse.

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John H. Makin at AEI


The gathering storm in Italy has a growing number of policy makers calling on the ECB
to use its most powerful tool—its printing press—to shore up debt markets by buying unlimited amounts
of euro-zone bonds, becoming the lender of last resort.
So far, the bank has resisted, arguing this wouldn't be legal under European law.
Wall Street Journal, 18 November 2011

Yet few believe the ECB would let the common currency collapse to defend that principle.

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Of course, even a panic can be rational.
If you think the very existence of the eurozone is now in question, then the funding pressure we are seeing across Europe
- not just governments but also, as the Wall Street Journal and the FT report today, banks and major companies - is entirely rational.
Stephanie Flanders, BBC Economics editor, 18 november 2011

But the German Chancellor is not supposed to think the existence of the euro is in question.

In fact, it is at the heart of her approach to the crisis - politically and economically - that the single currency must not only come out of this in one piece, but come out of it stronger, with the all members committed to behaving more like Germany.

Even that Germanic future for the euro might not be possible, if the market mayhem of the past few weeks is allowed to turn into a full-blown credit crunch, as many now fear. That would make it all but impossible for countries like Spain and Italy to re-balance their economies - or grow out from under the massive debts (public and private).

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Funding


And he /Sir Mervyn King, Bank of England chief/ has never thought the ECB should or could be the saviour of the euro, by buying vast quantities of Italian - or Spanish - government debt.

Why? Because, as I have explained on too many occasions,

To ask the ECB to step in, in these circumstances, is basically to ask it to take risks onto its balance sheet,
on behalf of a fiscal union that does not yet exist.
Apart from anything else, it's deeply undemocratic. No-one ever elected the ECB.
Stephanie Flanders, BBC Economics editor, 16 november 2011

Suitably designed, the ECB's balance sheet could perhaps be a temporary bridge to a full-blown fiscal union.
But it's quite something to ask it to play this role in a vacuum, however convenient that might be for governments like the French.
Apart from anything else, it's deeply undemocratic. No-one ever elected the ECB.

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Finito?
I have been examining and re-examining the situation, trying to find the potential happy ending.
It isn't there. The euro zone is in a death spiral.
The Economist, Free Exchange, Nov 9th 2011, by R.A,

Markets are abandoning the periphery, including Italy, which is the world's eighth largest economy and third largest bond market. This is triggering margin calls and leading banks to pull credit from the European market.

This, in turn, is damaging the European economy, which is already being squeezed by the austerity programmes adopted in every large euro-zone economy.

A weakening economy will damage revenues, undermining efforts at fiscal consolidation, further driving away investors and potentially triggering more austerity.

The cycle will continue until something breaks. Eventually, one economy or another will face a true bank run and severe capital flight and will be forced to adopt capital controls.

At that point, it will effectively be out of the euro area.

What happens next isn't clear, but it's unlikely to be pretty.

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Det finns ingen lösning, bra eller dålig, på eurokrisen
Det finns ingen lösning, bra eller dålig, på eurokrisen där euron finns kvar med de nuvarande medlemsländerna där dessa, förr eller senare, återfår sin ekonomiska blomstring. Rolf Englund blog 21 oktober 2011

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The euro is not an end in itself. The single currency is just an instrument, aimed at promoting economic prosperity and political harmony across Europe.
As the evidence mounts that it is doing the precise opposite, it is time to think not about how to save the euro – but about how to scrap it, or at least allow the weakest members to leave.

For reasons of pride, fear, ideology and personal survival,
it is extremely hard for European leaders to accept that the euro is a large part of the problem.

Gideon Rachman, FT 7 November 2011

The euro has helped both to create and sustain the crisis in Europe.

First, it caused interest rates to plunge in southern Europe, encouraging countries such as Italy and Greece to go on a borrowing binge.

Now the single currency rules out the options that postwar Italy and others traditionally used to cope with high levels of debt: inflation and devaluation of the currency.

Neither policy was cost free, but they provided an alternative to the “internal devaluation” (otherwise known as wage cuts and mass unemployment) that is currently being urged on Italy, Greece and much of southern Europe.

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Det finns ingen lösning, bra eller dålig, på eurokrisen
Felet är att eurozonens ledare inte vill inse att allt var fel från början.
De vill inte inse att tanken, att ha en gemsam valuta för Tyskland och Grekland, Finland och Cypern, var och är en felaktig tanke.
Allt var fel från början, precis som kommunismen.
Rolf Englund blog 2011-10-21

News


Euro crisis reaches the Rubicon
Sarkozy and Chancellor Merkel said that if Greece failed to accept the bailout package then she would have to leave the euro – and even the EU.
This is dynamite. The monetary union may behave more like a fixed exchange rate bloc
Roger Bootle, Daily Telegraph 6 Nov 2011


"would make the collapse of Lehman Brothers seem like a small problem"
A bank run in Greece is a “real danger” and the country’s plan for a referendum on the European bailout package is a “very serious threat” to the currency,
Andreas Utermann, the firm’s /Allianz Global Investors, a fund-management unit of Europe’s biggest insurer/ chief investment officer, said at a press event in Frankfurt today.
Bloomberg Nov 3, 2011

“An uncontrolled insolvency of Greece and an end of the euro would unleash a tsunami that would make the collapse of Lehman Brothers seem like a small problem.”

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Eurodämmerung
Things are falling apart in Europe; the center is not holding.
Papandreou is going to hold a referendum; the vote will be no.
Italian 10-years at 6.29 at pixel time; that’s a level at which the cost of rolling over the existing debt will force a default

And with everyone simultaneously pushing for fiscal austerity, a recession seems almost certain, aggravating all of the continent’s problems.
Paul Krugman 1 November 2011

The question I’m trying to answer right now is how the final act will be played.

At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro.

This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira.

Next stop, France.

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Götterdämmerung

Götterdämmerung är tyska för Ragnarök (ordagrant "Gudaskymning").

Ragnarök ("Gudarnas sista öde" refererar inom nordisk mytologi till en serie händelser, inklusive en avgörande strid, som förutspås leda till jordens undergång.


Bundestag went along with /Merkel/ – with an important caveat.
They made their approval conditional on the European Central Bank continuing to comply with Article 123 of the Treaty of Lisbon,
which says that the ECB cannot print money (or words to that effect).
John Mauldin, 29 Oct 2011

Before the summit, German Chancellor Angela Merkel went before her parliament and, in an impassioned speech, basically declared that unless the parliament approved the expansion and leverage of the EFSF the European Union would collapse, along with the decades-long peace that has prevailed. And the Bundestag went along with her – with an important caveat. They made their approval conditional on the European Central Bank continuing to comply with Article 123 of the Treaty of Lisbon, which says that the ECB cannot print money (or words to that effect). The Germans are obsessed with an independent ECB that will maintain the value of the euro – something to do with Weimar being embedded in their collective psyche.

Contrast this "obsession" with Martin Wolf leading the chorus for incoming ECB president Mario Draghi (an Italian) to ignore the Germans. Here are some choice paragraphs from his recent piece:

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Be Honest – The European Debt Deal Was Really A Greek Debt Default
This Greek debt deal is a huge red flag which signals to global financial markets that there is no longer safety in European bonds
theeconomiccollapseblog.com, 28 Oct 2011

But investors are not stupid. Greece was allowed to default. If Italy or Spain or Portugal gets into serious trouble it is likely that they will be allowed to default too.

Investors like to feel safe. They want to feel as though their investments are secure. This Greek debt deal is a huge red flag which signals to global financial markets that there is no longer safety in European bonds.

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One day after European leaders announced a plan to boost their euro backstop fund to 1 trillion euros,
China indicated it may attach conditions to any money it invests.
Der Spiegel 28 Oct 2011

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A key reason why the eurozone is under challenge is that markets have become conscious of a fundamental weaknesses in its design.
It relies on three hardly-compatible principles: national banking systems, which both finance the sovereign and rely on it as a potential backstop;
states that are supposed to be solely responsible for their own debt, so that they cannot rely on partners when in trouble;
and a central bank that has not been given the mandate to be a lender of last resort.
Jean Pisani-Ferry, economist and director of Bruegel, FT 26 October 2011

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Even if leaders do enough to avoid a financial meltdown,
resolving the deeper causes of the debt crisis — which include economic disparities that Europe hasn't figured out how to redress within the euro framework —   is likely to take years, analysts and officials warn.
WSJ 22 October 2011


A UK businessman is offering
a £250,000 /SEK 2,6 miljoner/ prize for the best plan to manage one or more countries abandoning the euro currency.
The award is being sponsored by Lord Wolfson, the chief executive of Next, the High Street retailer, and a Conservative party donor.
BBC 20 October 2011

The prize is described as the second biggest cash prize to be awarded to an academic economist after the Nobel Prize.
However, Lord Wolfson told the BBC that the competition was open to everyone.

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Europe Deeply Divided Ahead of Make-or-Break Summit
French President Nicolas Sarkozy fears that downgrading these countries' bonds would lead to the collapse of his banking system.
Der SPIEGEL Staff, 17 October 2011


Pumping cash into a problem and imposing austerity – as is happening in Greece – is not the answer.
Finding ways for prices and wages to adjust is.
But without a floating exchange rate, that requires a level of government intervention
that would probably be unacceptable to electorates.
Daily Telegraph quoting Mervyn King, Bank of England, 18 Oct 2011

By fixing their exchange rates within the eurozone, its 17 members have denied themselves "the natural safety valve, which can limit the extent of imbalances in demand across countries", said Sir Mervyn.
They've done this without putting in place other measures to protect competitiveness.

Anyway, far more urgent is how we deal with the crisis of confidence in some banks and sovereigns.

Here the Bank of England Governor had a clear message for the eurozone.
"A transparent recognition of losses and a substantial injection of additional capital are necessary to restore market confidence."

Four years into the crisis, said Sir Mervyn, it was "surely time to accept that the underlying problem is one of solvency, not liquidity".

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BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss,
leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis.
Bloomberg 8 November 2011

Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses.

The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values.

The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy while generating larger writedowns and capital shortfalls.

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News


If losing half the face value of a bond does not amount to a default, what does?
The bond exchange is billed as “voluntary”, but it is not clear that the International Swaps and Derivatives Association, a trade body, will agree.
The Economist print 29 Oct 2011

If it judges that a “credit event” has taken place, then payouts will be triggered on credit-default swaps (CDSs), insurance contracts against default on government bonds.

This is something that the governments and the ECB had been determined to avoid, fearing it would lead to financial catastrophe, rather as the bankruptcy of Lehman Brothers did in 2008.

“You don’t have to be paranoid to be terrified,” says a senior figure involved in the deliberations.

Sadly, this latest deal promises to be no more enduring. At best, it will buy time before the next round of panic. At worst, it may push the euro zone into catastrophe.

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A euroozone built on one-sided deflationary adjustment will fail.
If policymakers had understood two decades ago what they know now, they would never have launched the single currency. Only fear of the consequences of a break-up is now keeping it together.
The question is whether that will be enough. I suspect the answer is, no.
Martin Wolf, FT, 8 Nov 2011

Efforts to bring the crisis under control have failed, so far. True, the eurozone’s leadership has disposed of George Papandreou’s disruptive desire for democratic legitimacy. But financial stress is entrenched in Italy and Spain

The crisis will be over if and only if weaker countries regain competitiveness.

At present, their structural external deficits are too large to be financed voluntarily.

A euroozone built on one-sided deflationary adjustment will fail. That seems certain. If the leaders of the eurozone insist on that policy, they will have to accept the result.

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PJ Anders Linder, politisk chefredaktör på SvD, m fl,, borde kunna medge att det var bra att det blev Nej till EMU i folkomröstningen
Rolf Englund blog 1 november 2011


The eurozone sovereigns lack a true lender of last resort.
They are what Charles Goodhart of the London School of Economics calls "subsidiary sovereigns".
Martin Wolf, FT 2011-11-23


The fundamental challenge is not financing, but adjustment.
Eurozone policymakers have long insisted that the balance of payments cannot matter inside a currency union.
Indeed, it is a quasi-religious belief that only fiscal deficits matter: all other balances within the economy will equilibrate automatically.
This is nonsense. By far the best predictor of subsequent difficulties were the pre-crisis external deficits, not the fiscal deficits (see charts).
Martin Wolf, Financial Times 18 October 2011
Highly Recommended

Inside the eurozone, adjustment of imbalances remains essential. But it is also vastly difficult, because the exchange rate has gone.

In its place, comes adjustment via depression and default. A currency union with structural mercantilists in the core now threatens a permanent slump in the periphery.

Solving that is the true cure. Can it be done? I wonder.

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Flera franska bankaktier faller tungt på tisdagen,
efter att Moody's varnat för att Frankrikes kreditbetyg AAA är under press.
e24 2011-10-18

Frankrike kan få bidra med ytterligare pengar till andra europeiska länder eller sitt eget banksystem, som skulle innebära "betydande" nya förpliktelser i balansräkningen.

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...

Big snag.
If Europe’s leaders do indeed leverage their €440bn bail-out fund (EFSF) to €2 trillion or €3 trillion

through some form of "first loss" insurance on Club Med bonds – as markets now seem to assume –
the consequences will be swift and brutal.
Ambrose Evans-Pritchard, October 17th, 2011

Professor Ansgar Belke, from Berlin's DIW Institute, said any leveraging of the EFSF would be "poisonous" for France’s AAA rating and would set off an uncontrollable chain of events.

"It counteracts all efforts made so far to stabilize the eurozone debt crisis, which are premised on the AAA rating of a sufficiently large number of strong economies.
In extremis, it would probably cause the break-up of the eurozone", he told Handlesblatt.

We will find out soon enough what EU leaders actually intend to do – rather than what the European Commission would like them to do.

As US Treasury Tim Geithner said "the devil is in the details", not in the headlines.

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Something slightly odd is going on.
Markets are behaving as though European governments will definitely agree a rescue package for the eurozone next weekend and that the rescue package will sort all Europe's financial and economic woes.
Eurozone governments see investors lack of confidence in Italy's and Spain's ability to repay their debts as wrong, and that one day soon investors will come to their senses.
Robert Peston, BBC Business editor, 17 October 2011

All of which is to say that anyone who believes that we may be approaching the end of the eurozone's wobbles and agonies is guaranteed to be disappointed, and quite soon.

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The lead negotiator for private holders of Greek debt has said that
investors are unwilling to accept greater losses on their bonds than the 21 per cent agreed in July,
jeopardising eurozone plans to finalise a second Greek bail-out by the end of next week.
Financial Times 14 October 2011

A group led by France and the European Central Bank has insisted that any new “haircut” must be voluntary, since forced writedowns would constitute a full-scale Greek default, triggering insurance policies, known as credit default swaps, and potentially reigniting investor panic.

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Voluntary?


As Sir John Major wrote this morning in the FT, this does not solve EMU’s fundamental problem,
which is the 30pc gap in competitiveness between North and South,
and Germany’s colossal intra-EMU trade surplus at the expense of Club Med deficit states.

Ambrose Evans-Pritchard, 27 Oct 2011

It is therefore unlikely to succeed. It means that Italy, Spain, Portugal, et al must close the gap with Germany by austerity alone, risking a Fisherite debt deflation spiral. As I have written many times, this is a destructive and intellectually incoherent policy, akin to the 1930s Gold Standard

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Sir John Major wrote this morning in the FT

Hindsight is often graceless. But it is a fact that sterling did not enter the euro because we foresaw flaws in its structure. We believed monetary union without fiscal union was risky; that convergence of the powerful northern economies with southern Europe was unlikely (especially once Germany had absorbed her Eastern Länder). I had a political objection as well: that entry into the euro, and the abolition of sterling, would remove key policy options from the British government. That is why, at Maastricht, I opted out of the euro.

It was not easy. The opt-out was only obtained by threatening to veto the treaty.

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Germany is pushing behind the scenes for a "hard" default in Greece
with losses of up to 60 pc for banks and pension funds,

risking a chain-reaction across southern Europe unless credible defences are established first.
Ambrose Evans-Pritchard, 10 Oct 2011

Although Greece's 10-year bonds are trading at a 60pc discount on the open market, European banks do not have to write down losses so long as there is no formal default and the debt is held in their long-term loan book.

The danger arises if banks are forced to "crystallize" the damage before raising their capital buffers.

Said Gary Jenkins from Evolution Securities:
"Nothing has really changed and we still expect that the most likely outcome will be a comprehensive package – that circles the wagons around the sovereigns and the banks
– that will only be agreed at one minute to midnight when the alternative is that the market is about to implode on the Monday morning."

Pulling the plug on Greece risks bringing a much bigger crisis to a head all too quickly.

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The euro zone's decision to impose losses on holders of Greek government bonds has been an unmitigated disaster,
an entirely self-inflicted wound that has gravely destabilized the global economy.

From the moment euro-zone leaders first agreed at their Deauville summit in October 2010 that bondholder losses would be a condition of any euro-zone bailout after 2013
— breaking the unwritten rule that sovereign bonds from a developed economy are risk-free — the bloc has been dragged into a vortex of despair from which it has so far found no escape, as first government bond markets, then bank funding markets and now ordinary bank lending to companies have seized up
Simon Nixon, WSJ 7 October 2011

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The Ticking Euro Bomb
The architects of the euro and their successors have lost the Maastricht Treaty bet.
They have jeopardized an agreement made by 12 countries in the hope that the markets wouldn't notice how fragile their shiny new currency really is.
Der Spiegel Staff, 7 October 2011
En lysans artikel - Highly recommended

The nations of the euro zone are in debt to the tune of €8 trillion, while banks hold European government bonds at a face value of €1 trillion on their books.

The central banks of Greece, Italy, Portugal and Spain owe Germany's Bundesbank €348 billion.

The ECB has purchased €150 billion in government bonds, and the banks, fearing loan defaults, would rather park up to €150 billion with the ECB than lend money.

For a monetary union to function, the economies of its member states cannot drift too far apart, because it lacks the usual balancing mechanism, the exchange rate.

Normally a country depreciates its currency when its economy falters. This makes its goods cheaper on the world market, allowing it to increase exports and thereby reduce its deficits. But this doesn't work in a monetary union. If one country doesn't manage its economy effectively, the common currency acts as a manacle (fotboja).

Rogoff saiys the euro project is at a crossroads. The European partners must either enter into a forced marriage, a shotgun marriage, or the union will break apart sooner or later.
"And, of course, it's questionable whether the people of Europe are willing to enter into such an unromantic marriage."

In the end, only two possibilities will remain: a transfer union, in which the strong countries pay for the weak; or a smaller monetary union, a core Europe of sorts, that would consist of only relatively comparable economies.

A transfer and liability union requires new political institutions, and individual countries would have to confer a significant portion of their powers on Brussels.

The second path, a firewall would have to be erected between the countries that are in fact insolvent and others that have only a short-term liquidity problem. Then the banks would have to be provided with government funds, so that the financial system does not collapse when banks are forced to write off some of the government bonds on their balance sheets.

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Europe’s crisis is all about the north-south split
Anticipating the euro, drachma-denominated 10-year sovereign bonds fell more than 450 basis points
relative to German Bund rates in the three years leading up to Greece’s adoption of the euro in 2001.
Likewise, Portugal and Italy
Alan Greenspan, FT October 6, 2011

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Kommentar av Rolf Englund:
Konstigt att Greenspan inte tar med Spanien och Irland i denna grupp.

"I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created." Romano Prodi, EU Commission President. Financial Times, 4 December 2001 http://www.liebreich.com/LDC/HTML/Europe/08-Euro.html

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We are now in the stage of the crisis where people get truly desperate.
The latest crazy idea, which is being pursued by officials, is to turn the eurozone’s rescue fund into an insurance company,
or worse, a collateralised debt obligation, the financial instrument of choice during the credit bubble.
This is the equivalent of putting explosives into a can, before kicking it down the road.
Wolfgang Münchau, FT 2 October 2011

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Most economic historians and international economists I know believe a monetary union would fail unless it develops into a fiscal union.
Yet, almost all political and legal experts who specialise in the European Union believe a fiscal union is Utopian.
If both are right, a fiscal union is simultaneously necessary and impossible.
And that would mean – again if both are right – that the euro is doomed to fail.
Wolfgang Münchau, FT December 12 2010

Doom

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What Really Caused the Eurozone Crisis? (Part 1)
streetlightblog.blogspot.com, 22 Sept 2011
Good charts

First, Wolfgang Schäuble, Germany’s finance minister, from his recent piece in the Financial Times:
Whatever role the markets have played in catalysing the sovereign debt crisis, it is an undisputable fact that excessive state spending has led to unsustainable levels of debt and deficits that now threaten our economic welfare.

Next, here's an excerpt from a statement recently made by Greece's Deputy Prime Minister and Minister of Finance, Evangelos Venizelos:
We should not be the scapegoat or the easy excuse that will be used by European and international institutions in order to hide their own lack of competence to manage the crisis and give a definitive and complete answer to the attacks against euro, the world’s strongest currency.

These two statements capture the essence of two radically different views about the origins of the EZ debt crisis.

Which one is right?

Rather than large current account deficits being the result of fiscal mismanagement or excessive consumption, the current account deficits were the necessary and unavoidable counterpart to the surge in capital flows from the EZ core.

Rather than above-average inflation rates and deteriorating competitiveness being signs of labor market inefficiencies or lax fiscal policies in the peripheral countries, appreciating real exchange rates were inevitable as the mechanism by which those current account deficits were effected.

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Konstruktionen kring euron har inte varit fel
Jan Björklund, Birgitta Ohlsson, Carl B Hamilton och Olle Schmidt


There was progress towards a eurozone rescue deal during the IMF's annual meeting in Washington, according to those present.
There would be a haircut or writedown of Greek sovereign debt of 50%.
Robert Peston, BBC Business editor, 25 sept 2011

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War Game
On 13-14 September about 100+ movers and shakers took part in a conference and "war game"
organised by the Breughel think tank, modelling solutions to the euro crisis.
The full document is here. But the summary is: they saved the euro. Here's how.
In the war game the EU/IMF decided to expand the EFSF to between $3 trillion and $5 trillion
Paul Mason Economics editor, BBC Newsnight, 25 Sept 2011

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Amid a growing air of desperation, world financial leaders said they are scrambling to douse
the European debt crisis that threatens to spark another global financial meltdown.
WSJ 24 Sept 2011

"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally," U.S. Treasury Secretary Timothy Geithner said in a speech before the IMF. The U.S. Treasury is pushing Europe to respond to the crisis with a "shock-and-awe" strategy. Washington believes a major increase in the effective size the euro zone bailout fund would finally put market fears to rest.

People's Bank of China Gov. Zhou Xiaochuan urged a prompt resolution to the euro-area debt crisis through "forceful and credible" measures. "The negative feedback loop between public-sector and private financial institutions' vulnerabilities weighs heavily on market confidence and limits the effectiveness of macroeconomic policies," he said.

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Debate about whether the European dream, and the euro, can survive, and if it should have even been created in the first place.
CNN 23 September 2011

The Treaty on European Union, known as the Treaty of Maastricht, was signed in the Netherlands city of Maastricht on February 7, 1992,

A default by Greece, or its departure from the eurozone, also carries contagion risk. That means investors will worry about other nations in trouble
- such as Italy, which makes up 17% of the eurozone economy, nearly seven times bigger than the economy of Greece -- and further increase financial instability across the globe.

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Allt var fel från början, precis som kommunismen.
- Om bara inte Stalin hade kommit...
- Om bara inte Grekland hade misskött sin ekonomi...
Rolf Englund blog juli 2011

Det är målsättningen om ett ständigt fastare förbund
- "ever closer union" -
som är själva grundbultsfelet med EU.
Rolf Englund 2005

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The euro, as we know, is a curious edifice (A building, especially one of imposing appearance or size), built without exits.
Perhaps it was noble commitment to the unifying ideal, perhaps hubris of an order to rival Ozymandias,
but, either way, its founders decreed the currency to be forever. Retreat was not an option.
WSJ 23 Sept 2011

The zone's endless travails have long ceased to be either a little local difficulty or the object of a bit of schadenfreude on the part of the world's Treasuries.

They've become a source of grave systemic risk at a time when the world really doesn't need another one.

The central theme of "Ozymandias" is the inevitable complete decline of all leaders, and of the empires they build, however mighty in their own time.
http://en.wikipedia.org/wiki/Ozymandias

There is no provision in any European Treaty for a country to leave the eurozone.
That was deliberate.
It was intended to make it clear that the eurozone was forever – like the Soviet Union and the Holy Roman Empire.
Roger Bootle, Daily Telegraph 5 September 2011

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The commentaries that puzzle me are those that say in one breath that the eurozone cannot survive
and follow in the next by asserting that break-up is impossible because of the attendant costs.
From the recent conversations I have had with European ministers and officials, the passenger on the Berlin U Bahn or Athens Metro
is just as likely to be right as the multitude of pundits and experts.

Philip Stephens, FT September 22, 2011

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Snillen spekulerar
“The evidence is very clear,” said EU employment commissioner Laszlo Andor at a European Parliament hearing.
“The most rapid increases of the unemployment rate in the last one year were observed in countries that underwent very tough austerity.”
WSJ 22 sept 2011


What comes next is the explosion of the European project.

America will survive this because America is a state.
But as Bismarck once remarked, "Whoever speaks of Europe is wrong. Europe is a geographical expression."
The "fiscal union" that's being mooted will never come to pass:
German voters won't stand for it, and neither will any other country that wants to retain fiscal independence
— which is to say, the core attribute of democratic sovereignty.

Bret Stephens, writes the Journal's column on foreign affairs, WSJ 20 Sept 2011

The riots of Athens will become those of Milan, Madrid and Marseilles. Parties of the fringe will gain greater sway. Border checkpoints will return. Currencies will be resurrected, then devalued.

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Sockerbagare

News


Remarkably, the European authorities that drove Ms Lagarde’s selection just three months ago have rejected important components of her analysis
The world’s finance ministers and central bank governors will gather in Washington next weekend for their annual meetings.
The meetings will have been a failure if a clearer way forward for Europe does not emerge.
Lawrence Summers, FT 18 Sept 2011 With nice pic too

Failure would be yet another example of what Churchill called “want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self- preservation strikes its jarring gong – these are features which constitute the endless repetition of history”.

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We are moving away from what I consider the only effective solution to the crisis.
This means, by extension, that we are moving closer towards an involuntary break-up.
Wolfgang Münchau, FT 18 Sept 2011

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"We must now face the difficult task of moving forward towards a single economy, a single political entity...
For the first time since the fall of the Roman Empire we have the opportunity to unite Europe."

Romano Prodi, EU Commission President, speech to European Parliament, 13th October 1999.

"I am sure the euro will oblige us to introduce a new set of economic policy instruments.
It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."

Romano Prodi, EU Commission President. Financial Times, 4 December 2001


As Europe's leaders seemingly dance on the edge of disaster,
what are the real problems facing the euro?
For many onlookers, the issues may seem complicated and interconnected.
But essentially they boil down to four big dilemmas
Borrowers vs Lenders, Austerity vs Growth, Discipline vs Solidarity, Europe vs the Nations
A Higly Recommended article by Laurence Knight, BBC, 18 September 2011

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EMU - En snabbkurs

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European officials ended a two-day financial summit Saturday with no new concrete plans
as deep divisions remained about the best course for the coming weeks and months.
Washington Post, 17 September 2011

On Saturday, the officials discussed but failed to agree on a proposal to tax financial transactions. Greece is likely to run out of cash by mid-October if it does not receive billions of euros of bailout money, potentially setting off a financial contagion that could hop from bank to bank and country to country.

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The euro – a cross-border project supported by the political elite and by businesses
about which many ordinary Europeans had doubts because they could not see what use it was to them.
John Gapper, FT 16 Sept 2011

But they tolerated it as long as it appeared to work, just as the growth of global investment banking was regarded as irrelevant to most people’s day-to-day lives.

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"ever closer union"

News


Why is Spain — along with Italy in so much trouble?
The answer is that these countries are facing something very much like a bank run
Paul Krugman, New York Times, 11 September 2011

The run is on their governments rather than, or more accurately as well as, their financial institutions.

Investors, for whatever reason, fear that a country will default on its debt. This makes them unwilling to buy the country’s bonds, or at least not unless offered a very high interest rate. And the fact that the country must roll its debt over at high interest rates worsens its fiscal prospects, making default more likely, so that the crisis of confidence becomes a self-fulfilling prophecy.

And as it does, it becomes a banking crisis as well, since a country’s banks are normally heavily invested in government debt.

Now, a country with its own currency, like Britain, can short-circuit this process: if necessary, the Bank of England can step in to buy government debt with newly created money.

What Mr. Trichet and his colleagues should be doing right now is buying up Spanish and Italian debt — that is, doing what these countries would be doing for themselves if they still had their own currencies

But the E.C.B. immediately found itself under severe pressure from the moralizers, who hate the idea of letting countries off the hook for their alleged fiscal sins.

And the perception that the moralizers will block any further rescue actions has set off a renewed market panic.

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Elementärt, min käre Watson. Men det fordras en Krugman eller en Nils Lundgren, för att förklara det.

Att de kan förklara det så bra beror på att de förstår det så bra, inte på att de skulle vara bättre pedagoger än vi vanliga dödliga.

So grave, so menacing, so unstoppable has the euro crisis become that even rescue talk only fuels ever-rising panic.
Uunless politicians act fast to persuade the world that their desire to preserve the euro is greater than the markets’ ability to bet against it,
the single currency faces ruin. It is not just the euro that is at risk, but the future of the European Union and the health of the world economy.
The Economist editorial, Sept 17th 2011, print

Few people, least of all this newspaper, want either vast intervention in financial markets
or a big shift of national sovereignty to Europe. It is just that the alternatives are far worse.

Greece, which is unambiguously insolvent, ought to have a hard but orderly write-down.

The ECB must declare that it stands behind all solvent countries’ sovereign debts and that it is ready to use unlimited resources to ward off market panic. That is consistent with the ECB’s goal to ensure price and financial stability for the euro zone as a whole.

Third, it needs to shift the euro zone’s macroeconomic policy from its obsession with budget-cutting towards an agenda for growth. And finally, it must start the process of designing a new system to stop such a mess ever being created again.
The fourth part will take a long time to complete: it will involve new treaties and approval by parliaments and voters.

The Economist: This is not what they were promised when the euro was set up.
Completely true, and sadly irrelevant.

Rolf Englund blog 16 sept 2011

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News


Treasury Secretary Timothy F. Geithner made an unusual appearance at a meeting of euro zone finance ministries.
Mr. Geithner had been invited to offer some advice on fixing Europe’s sovereign debt and banking problems.
European leaders, who have been slow to react to the root causes of the problem, emerged from the meeting dismissive of Mr. Geithner’s ideas
and, in some cases, even of the idea that the United States was in a position to give out such pointers.
New York Times 16 Sept 2011

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dismissive


U.S. Treasury Secretary Timothy Geithner told EU finance ministers on Friday they should
end loose talk about a euro zone break-up and work more closely with the European Central Bank to tackle the debt crisis.
CNBC 16 Sept 2011

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European banks are “grossly under-capitalized”
and the debt crisis is more serious for the region than the 2008 meltdown

“The euro cannot survive in its present form, it’s going to have to be reformed dramatically.
Gordon Brown, Bloomberg 16 Sept 2011


Will the eurozone break up?
"The short-term banking crisis is the biggest concern Europe is facing,"
said the International Monetary Fund's (IMF) Deputy Managing Director, Min Zhu, second in command at the IMF
"There is no room for politicians to muddle through. They have to take decisive action today."
Well, did they? They had a teleconference at which they assured Greece it would stay in the euro,
and urged Greece to meet the conditions of the 21 July 2011 re-bailout agreement.

Paul Mason Economics editor, BBC Newsnight, 15 September 2011


Just nu är Italien och Spanien viktigast.
Det är ingen som vet hur de ska klaras, men i slutändan måste det bli ECB som kommer att göra något spektakulärt.
Det kan bli så att ECB stödjer all spansk och italiensk upplåning, det vet vi inte. Men där är vi inte i dag.
Bengt Dennis, SvD Näringsliv 13 mars 2012

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Italien - Spanien


Jag skulle bli förvånad om alla de länder som i dag har euron som valuta kommer att ha det om tio år.
Kanske kommer bara ett mindre antal av dem att behålla den

Lars Calmfors, kolumn DN 13 december 2011


Rumpnissen bleknar
Det krävs mindre hemlighetsmakeri om EU ska överleva.
Maktbalansen i EU förändras av eurokrisen.
Avgörande beslut fattas i slutna rum
Annika Ström Melin, DN, 8 december 2011

När förhandlingarna mellan 27 politiska ledare runt bordet sätter i gång på allvar är det styrkan som avgör. I teorin har varje land en röst och rätt att lägga in sitt veto, men i praktiken är det de stora länderna som har mest att säga till om.

Under EU-nämndens möte i riksdagen på onsdagen framkom att Frankrike och Tyskland ska presentera ett färdigt och mer detaljerat förslag till fördragsändringar på torsdagens toppmöte. Inte ens EU:s president hade tydligen fått läsa det förrän sent på onsdagseftermiddagen.

Då skickades det fransk-tyska utkastet i ett brev (på franska) till Herman Van Rompuy, Fredrik Reinfeldt och de andra stats- och regeringscheferna i unionen.

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Annika Ström Melin

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"Vi måste ha en åsikt på EU-nämnden på onsdag”
säger Marie Granlund (S), vice ordförande i riksdagens EU-nämnd
Men vid lunchtid på tisdagen hade de ännu inte fått något färdigt förslag att ta ställning till.
DI 2011-12-06

Vänsterpartiet säger ”blankt nej” till det fransk-tyska förslaget, meddelade Jonas Sjöstedt i en intervju med di.se tidigare på tisdagen. Han anser att förslaget är djupt odemokratiskt.

Marie Granlund säger att Socialdemokraterna ännu inte tagit ställning till förslaget och vill inte uttala sig om innehållet i Merkels och Sarkozys utkast.

”Det går inte bara att följa det här via nyheterna. Man måste ju veta vad det verkligen innebär. Man måste vara seriös när det handlar om fördragsförändringar”, säger hon.

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Att rädda euron är i fokus, men för att klara det krävs en fördragsändring.
- Vi måste behålla trovärdigheten, konstaterar Merkel. Det vi nu presenterar visar att vi är helt och fullt beslutna att behålla euron.
Förhoppningen är att det blir ett nytt fördrag, antingen för alla 27 EU stater eller bara för eurozonens länder.
Ekot 5 december 2011

Angela Merkel understryker att Tyskland och Frankrike som starka länder inom zonen har ett särskilt ansvar för att se till att krisen inte fördjupas utan blir löst.

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Ms Merkel’s scepticism also stems from bitter experience.
She followed investors’ advice and called for private holders of Greek bonds to share the burden of a second bail-out for Greece.
Those who have spoken to the chancellor say she feels duped by those investors, who urged her to agree to a restructuring of Greece’s massive debt burden
but then told the chancellor that she had also made all other eurozone bonds suspect.
Financial Times, 4 December 2011


Wolodarski och eurons hot mot demokrati och välstånd
Rolf Englund blog 4 december 2011


Lösningen, det bästa möjliga utfallet, innebär alltså en inflationsspiral i hela eurozonen, samt att Sydeuropa i realiteten blir koloniserat.
Budgetåtstramningarna som krävs kortsiktigt kommer dessutom försämra utvecklingsläget ytterligare. Därför: långvarig lågkonjunktur.
Isobel Hadley-Kamptz, Expressen, 3 december 2011

Pratar man med näringsliv och eurokrater tycker de att den lösningen är helt okej: "det finns inte tid för politiska spel", som EU-ordföranden Barroso sade.

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Mer av Isobel Hadley-Kamptz


Hur illa ställt är det egentligen?
För detta är samma åtgärder som centralbankerna genomförde i samband med Lehmankrisen.
Per Lindvall, e24, 2011-11-30

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Euron står inför ett sammanbrott
Patricia Hedelius, SvD Näringsliv 30 november 2011 kl 23:07

– Eurosamarbetet kommer inte att hålla som vi känner det idag. Antingen går man snabbt mot gemensam finanspolitik och därmed gemensam statsbildning, eller så är det är bara en fråga om när och hur EMU bryts upp, inte om, säger Royal Bank of Scotlands chefekonom Pär Magnusson.

Motsättningarna inom eurozonen talar snarare för att det är något av de rika länderna som kommer att välja att lämna. Den politiska opinionen på hemmaplan kommer sannolikt bli övermäktig. T

Tyskland ligger faktiskt nära till hands att bli det första landet att bryta sig loss. Valutaunionen var inget man egentligen önskade utan kan ses som en eftergift för att Västtyskland skulle få förenas med Östtyskland.

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Överallt sprids känslan av att undergången närmar sig.
”Överlever euron julen?” undrade tidningen Le Journal du Dimanche i en jätterubrik på förstasidan i söndags.
Annika Ström Melin på Parisbesök, signerat DN 30 november 2011


Eurokrisen, fisksoppan och elitens olidliga dumhet
Rolf Englund blog 28 november 2011


Socialism och EMU - två misslyckade fullskaleexperiment
Om det fortfarande finns någon som förnekar sambandet mellan euron och eurokrisen har jag tagit fram ett
diagram som illustrerar hur PIIGS-ländernas bytesbalans har utvecklats sedan euron infördes.
Den hälsosamme ekonomisten, 27 November 2011

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The ongoing discussions of economic policy and principles since the Great Recession
Again and again one sees people with seemingly sterling credentials
— Federal Reserve presidents, economists with Ph.D.s from good schools —
propounding views that I thought were obvious fallacies, at least to anyone who had studied the subject a bit
Paul Krugman, 11 February 2012

Maybe the idea is that the burst bubble reduces demand, and hence leads to lower production.
But at that point you’re into a Keynesian world of deficient demand, and you should be talking about ways to close the gap,
not accepting it as a fact of life.

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Economic theory discredited


Eurozone Problems
I’m giving a talk in Paris tomorrow. Here are some slides;
they won’t come as a shock to regular readers, but it may be useful to see them all in one place
First, I make the case that the overall economic crisis is driven by private debt, not public debt
Paul Krugman, New York Times, 30 January 2012

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Paul Krugman at NYT


De människor som mobbade EU till att anta en gemensam valuta,
de människor som är mobbade både Europa och USA till åtstramning är inte teknokrater.
De är istället djupt opraktiska romantiker.
Så varför drev dessa "teknokrater" på så hårt för euron, och bortsåg från många varningar från ekonomer?
Delvis var det drömmen om ett enat Europa, som kontinenten elit fann så lockande att de viftade undan praktiska invändningar.
Paul Krugman, New York Times, 20 November, 2011

Översättning av Google och Rolf Englund

De saker som de kräver för sina romantiska visioner är ofta grymma, med stora uppoffringar från vanliga arbetare och familjer.
Men faktum kvarstår att dessa visioner drivs av drömmar om hur saker ska vara snarare än av en kall bedömning av hur saker och ting verkligen är.

För att rädda världsekonomin måste vi störta dessa farliga romantiker från sina piedestaler.

Sanningen är att Europas marsch mot en gemensam valuta var från början ett tvivelaktigt projekt enligt varje objektiv ekonomisk analys.
Kontinentens ekonomier var alltför olika för att fungera smidigt med en-storlek-passar-alla penningpolitik, alltför benägna att uppleva "asymmetriska chocker" där vissa länder sjönk medan andra blomstrat. Och till skillnad från amerikanska delstater, ingår inte europeiska länder i en enda nation med en enhetlig budget och en arbetsmarknad binds samman av ett gemensamt språk.

Låt mig peka ut särskilt Europeiska centralbanken (ECB), som är tänkt att vara den ultimata teknokratisk institution, och som har varit särskilt anmärkningsvärd för att ta sin tillflykt till fantasier medan saker går fel. Förra året till exempel, bekräftade banken sin övertygelse om "the confidence fairy" - det vill säga tron att budgetnedskärningar i en deprimerad ekonomi faktiskt kommer att främja en exåansion genom att öka företagens och konsumenternas förtroende. Konstigt att säga, har det inte hänt någonstans.

Så är jag mot teknokrater? Inte alls. Jag gillar teknokrater - teknokrater är vänner till mig. Och vi behöver teknisk kompetens för att hantera våra ekonomiska problem.

Men vår diskurs snedvrids av ideologer och önsketänkande tänkare - tråkiga, grymma romantiker - som låtsas vara teknokrater.

Läs den engelska texten här


Hela Europa riskerar att få nobben när marknaderna öppnar i kväll i Asien.
Vem vill låna ut 80 miljarder till Belgien?
Rubriken på första sidan i Le Soir möter mig på ett dagsbesök i Bryssel,
surrealismens huvudstad där en morgontidning heter ”Kvällen”.
Det mesta verkar vara sig likt. Fast värre. Mycket värre.
Rolf Gustavsson, SvD 27 november 2011


Slutet för den nuvarande valutaunionen. Inte det mest sannolika, men ändå inget orealistiskt perspektiv.
Euroländerna kan bli tvungna att bryta mot reglerna för att valuta­unionen ska överleva.
EU-fördraget gör klart att Europeiska centralbanken, ECB, inte får låna ut pengar till medlemsstater.
I en verklig nödsituation är ändå detta vad som måste göras.
Johan Schück, DN 25/11 2011

Inget kan rädda Grekland
Johan Schück, DN 2011-09-16


Eurojättar varnar för total valutakollaps
Ekot 25/11, 18:35, med fin bild


Banker förbereder sig för eurokollaps
Ekot 25/11 2011, 10:47, med fin bild


Greker tömmer sina bankkonton
Under oktober plockade spararna ut omkring 10 miljarder euro, drygt 90 miljarder kronor.
DI 2011-11-03 13:13

Kontanter, guldmynt och placeringar utomlands lockar mer än pengar på banken.

Från att ha tömts på upp till 2 miljarder euro, cirka 18 miljarder kronor, per månad den senaste tiden har uttagen från de grekiska bankerna accelererat.
Under oktober försvann motsvarande cirka 90 miljarder kronor, cirka 6 procent av tillgångarna, från de grekiska bankerna, rapporterar FinancialTimes.

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Eurodämmerung
Nobelpristagaren Paul Krugman förutspår i en krönika i The New York Times
ett sammanbrott i eurosamarbetet. Krugman räknar med att det blir ett nej i den grekiska folkomröstningen
och att de italienska räntorna redan är på nivåer som på sikt kommer att förorsaka bankrutt.
DI/TT 1 november 2011

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Götterdämmerung är tyska för Ragnarök (ordagrant "Gudaskymning").

Ragnarök ("Gudarnas sista öde" refererar inom nordisk mytologi till en serie händelser, inklusive en avgörande strid, som förutspås leda till jordens undergång.


106 miljarder euro
Tyvärr är invändningen att EU-ledarna löste alla problem
utom hur allt ska gå till och var pengarna ska komma ifrån.
DN-ledare 28 oktober 2011

Europas största banker tvingas att öka kapitaltäckningen, ett mått på risknivån, från 4 till 9 procent. De har fram till sommaren på sig.

För att undvika att de smiter undan genom att krympa tillgångarna är beloppet som ska skjutas till fastställt.

Totalsumman 106 miljarder euro för rekapitalisering av bankerna reser ändå frågetecken. Nästan hälften är redan täckt av olika länders räddningspaket. EU:s stresstester har tidigare konsekvent underskattat bankernas brister, och IMF tror att det behövs 200 miljarder.

Hur det mycket större Italien ska botas är nästa mysterium.

Toppmötets svajigaste resultat gäller dock räddningsfonden EFSF, som ska skydda övriga skuldstater från grekisk smitta.
Tysklands regering har lovat väljarna att inte höja skattebetalarnas insats.
Dilemmats så kallade lösning är att låta EFSF garantera en viss procent av exempelvis nya italienska obligationslån. Dessutom ska hugade investerare från Kina till Norge lockas att satsa sina överskott.

Vips blir fondens ”effekt” fyra fem gånger större. Detaljerna tar, föga förvånande, veckor att reda ut. Konstruktionen är i bästa fall ett teoretiskt försök, i sämsta fall ett nytt risktyngt finansinstrument.

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Dagens Nyheter

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Angela Merkels och Nicolas Sarkozys modell, som Jacques Delors kallar Merkozy,
är ett mellanstatligt organiserat Europa dominerat av Tyskland och Frankrike.

Och för Merkozy handlar det i dag framför allt om en sak, att rädda euron.
Rolf Gustavsson SvD 23 oktober 2011

Till varje pris? Är de till och med beredda att offra gemenskapen i EU för att rädda valutan euron?

Rubriken på Philippe Ricards analys i Le Monde var illavarslande, om än försett med ett frågetecken: Europeiska Unionen är död – leve eurozonen?

...

Mercosur is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción
Its purpose is to promote free trade and the fluid movement of goods, people, and currency.
Wikipedia

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Början på sidan

Nyheter


Det finns ingen lösning, bra eller dålig, på eurokrisen
Även om man, på något sätt, skulle kunna ta hand om medlemsländernas skulder så återstår
arbetslöshet och stagnation förorsakat av felaktigt kostnadsläge
Rolf Englund blog 21 oktober 2011


Det är obegripligt hur EU kunde blunda för att hela Europa inte är som Tyskland.
Aten och Berlin är två helt skilda världar.
Richard Swartz, Kolumn DN 1 okt 2011


War Game: Nu börjar eurokrisen bli riktigt spännande
Rolf Englund blog 25 sept 2011


Spara detta citat för framtida bruk
- Grekland är fast beslutet att uppfylla sina åtaganden. Inga grekiska papper kommer någonsin att sakna täckning, säger Greklands finansminister Evangelos Venizelos SvD/TT-Reuters 25 Sept 2011

För att lugna marknaden och för ha verktyg att hindra krisen från att spåra ur totalt arbetar Europas ledare på ett sätt att
förstärka räddningsfonden EFSF. Euroländerna beslutade senast i somras att förstärka fonden till 440 miljarder euro.
Det beslutet har ännu inte godkänts av alla euroländer, men för att fonden ska räcka för att vid behov rädda även Italien och Spanien
måste den vara minst 2 000 miljarder, enligt analytiker.

Kommentar av Rolf Englund:
2 000 miljarder, euro alltså, är i kronor 18 600 miljarder.
Det låter som väldigt mycket.

Euro-krisen
Greklands fortsatta kris får världen att skaka
Tre scenarier för Grekland
Marianne Björklund, DN 24 sept 2011

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Nyheter


IMF-chefen varnar för kollaps
"Med mörka moln över Europa och med stor osäkerhet i USA
riskerar vi en kollaps i den globala efterfrågan", säger IMF-chefen Christine Lagarde.
Den globala ekonomin behöver en inkluderande, jobbskapande, tillväxt Det sade IMF-chefen Christine Lagarde på fredagskvällen, enligt ett anförande som publicerats på IMF:s webplats.
DI 24 sept 2011

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ett anförande som publicerats på IMF:s webplats

SOU 2002:16, Stabiliseringspolitik i valutaunionen, slutbetänkande samt underlagsrapporter
Svenskt Näringsliv får härmed avge följande synpunkter på rubricerat betänkande.
Svenskt Näringsliv avstyrker det föreslagna finanspolitiska rådet.
Det finns inget behov för ett sådant eftersom vi anser att aktiv stabiliseringspolitik inte skall bedrivas.

Läs mer här

Början på sidan

Nyheter


Vilken väg tar euron?
Therese Larsson, SvD Näringsliv 24 sept 2011

Scenario 6: Status Quo – allt fortsätter som vanligt

Ett annat, inte helt omöjligt, scenario är att allt fortsätter som hittills. Politikerna fortsätter att hitta ad-hoc lösningar jagade av marknaden. Grekland kämpar på, BNP fortsätter att rasa, arbetslösheten att stiga och landet tvingas till en lång och plågsam interndevalvering med social oro som följd.

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Början på sidan

Nyheter


Det minst dåliga scenariot är att krisländerna i södra Europa intensifierar sina budgetsaneringar
och att det i kombination med nuvarande EU-stöd får deras statsskuldräntor att falla.
I så fall kan länderna börja minska sina statsskulder och klara sig utan nya stöd.
Tyvärr är detta inte en sannolik utveckling
.
Lars Calmfors, DN 13 September 2011

Det andra huvudscenariot är att ett växande väljarmotstånd mot ytterligare stödinsatser i Tyskland och på andra håll leder till ett abrupt slut för dessa.
Den troliga följden blir oordnade betalningsinställelser i ett eller flera av krisländerna.

Långivarna gör då stora kapitalförluster på sina innehav av statspapper från dessa länder.
En rad banker går i så fall omkull, vilket förmodligen utlöser en ny kraftig recession.

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Början på sidan

Nyheter


Charles Gave beskriver situationen i Grekland som ett ”lågintensivt inbördeskrig”.
”Och det kommer att sprida sig till Frankrike, Portugal och Spanien och andra länder”
”Många känner sig lurade. Eurokraterna försökte genomföra en politisk kupp när euron infördes, i syfte att skapa en europeisk stat.
Men befolkningen i Europa vill inte ha en sådan stat. Nu ser vi motreaktionen”
DI 23 sept 2011

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Freden

Federalism

News


”För att rädda Europa måste vi döda euron”, säger analysräven Charles Gave
Charles Gave är en av grundarna till den Hongkongbaserade analysfirman Gavekal och har följt finansmarknaderna i mer än 40 år.
Enligt Charles Gave måste euron avskaffas som gemensam valuta. Men vägen ur ut valutasamarbetet kan bli smärtsam, tror han.
”Kaos är det värsta, men mest troliga scenariot. Politikerna har varit inkompetenta i tio år, så varför skulle de plötsligt vara kompetenta nu?”
DI 22 sept 2011

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Konstruktionen kring euron har inte varit fel
Euron är numera kärnan i det europeiska samarbetet.
Utan den reduceras samarbetet till ett frihandelsområde, mindre långtgående och mindre betydelsefullt än
den politiska union som med en gemensam valuta möter globaliseringens utmaningar.
Jan Björklund, Birgitta Ohlsson, Carl B Hamilton och Olle Schmidt, SvD Brännpunkt, 9 september 2011


Den gemensamma valutan ska räddas genom exit för de stater som gör euron sjuk. I den bästa av världar kan detta ske under ordnande former.
I verkligheten är det lätt att se ett kaotiskt förlopp som inte bara skulle slå hårdare mot ett land som Grekland,
utan som i den tätt tvinnade ekonomin skulle spridas vidare likt ringar på vattnet.
Claes Arvidsson, SvDs ledarsida 9 september 2011


George Soros has warned Europe's debt crisis risks triggering another Great Depression unless euro zone leaders adopt a series of radical policy measures, including the creation of a common treasury.
Soros, in an article for the New York Review of Books and Reuters.com, says policymakers must prepare for the possibility that Greece, Portugal and perhaps Ireland will have to default and leave the euro zone.

Does the Euro Have a Future?
policymakers must prepare for the possibility that Greece, Portugal and perhaps Ireland will have to default and leave the euro zone.
radical policy measures, including the creation of a common treasury
George Soros, New York Review of Books, October 13, 2011

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News


By joining the euro, Greece and other peripheral nations lost much more than control over interest and exchange rates.
They also lost the capacity to issue debt in their own currencies.
Just as bad, they have lost the discretion to apply counter-cyclical budget policies.
The extreme mix of deflationary measures they have been forced into to regain competitiveness means t
hey may not even be able to use automatic fiscal stabilisers to fight economic contraction
.
Jeremy Warner, DT, 14 Sep 2011

A self-feeding spiral of economic destruction has established itself.

As a result, they are being progressively forced into default, a fate hitherto reserved only for developing and third world nations.

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News


Mrs Merkel told the RBB radio station:
"The top priority is to avoid an uncontrolled insolvency, because that would not just affect Greece
At the weekend Economy Minister Philipp Roesler suggested that Greece would need an "orderly default"
BBC 13 September 2011

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News


After Stark
Moody’s is likely to downgrade BNP Paribas, Crédit Agricole and Société Générale today
Le Monde: ECB buying bonds in order to avoid an explosion of the eurozone.

Eurointelligence Daily Briefing 12/9 2011


"Through stupidity, romanticism and goodness knows what, the experts — chancellors and economists — supported the idea of a currency
that has no chance of working. Even its predecessor, the Exchange Rate Mechanism, collapsed."
Tim Martin CNBC 9 September 2011

"I was one of the main spokesmen against the euro eleven years ago and said then it would not survive
… because if you want a currency you have to have a government," Tim Martin, chairman of UK pub restaurant chain JD Wetherspoon.

He added that history had shown that currencies without governments fail.

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Alla valutaunioner i historien har antingen lett till en stat eller spruckit.
Varför skulle EMU vara så annorlunda?

Anders Lindberg, Hässelby, SvD Synpunkt 14/8 2003

*

- To Be, Or Not To Be A Country - that is the question
Sir Oliver Wright, GCMG, DCVO, DSC
The European Journal, April 2001
Sir Oliver Wright was British ambassador to West Germany 1975-81 and to the USA 1982-86.


“Perhaps future historians will consider Maastricht a decisive step towards the emergence of a stable, European-wide power. Yet there is another, darker possibility ... The effort to bind states together may lead, instead, to a huge increase in frictions among them. If so, the event would meet the classical definition of tragedy: hubris (arrogance), ate (folly); nemesis (destruction).”

I wrote the above in the Financial Times almost 20 years ago.

My fears are coming true.
This crisis has done more than demonstrate that the initial design of the eurozone was defective, as most intelligent analysts then knew;
it has also revealed – and, in the process, exacerbated – a fundamental lack of trust, let alone sense of shared identity,
among the peoples locked together in what has become a marriage of inconvenience.
Martin Wolf, FT, 13 September 2011

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Freden

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News


The only way to save the eurozone from collapse
The eurozone may be only weeks away from a financial collapse.
Through a combination of short-sightedness and financial illiteracy, the European Council has now put itself in a position where it desperately needs Eurobond
Wolfgang Münchau, FT 13 November 2011

The cause of the panic attack was the European Council’s decision on October 26 to renegotiate the private sector participation of Greek sovereign debt holders.
With that decision European leaders destroyed what was left of a functioning eurozone government bond market. Investors interpreted it – correctly in my view – as a precedent.

They then dumped their Portuguese, Spanish, Italian and even French government bonds.

The introduction of a Eurobond will require a broader and deeper economic government that extends well beyond the notion of a fiscal union.

But it might not happen. The crisis is moving too fast. We may well find that the Germans, the Dutch and the Finns are not ready for this.
Their political leaders have certainly not prepared the ground for such a momentous decision.

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Eurobonds


Europe is now leveraging for a catastrophe
A leveraged EFSF is attractive to politicians for the same reason that subprime mortgages once appeared attractive to borrowers.
- the crisis ultimately vindicates the German constitutional court’s conservatism in its definition of what constitutes a functioning democracy
Wolfgang Münchau, FT October 23, 2011

The way eurozone leaders have been handling the crisis ultimately vindicates the German constitutional court’s conservatism in its definition of what constitutes a functioning democracy.

Policy co-ordination among heads of state is both undemocratic and ineffective.

A monetary union may require more than just a eurobond and a small fiscal union. It may require a formal, if partial, transfer of sovereignty to the centre – that includes the rights to levy certain taxes, impose regulation in product, labour and financial markets, and to set fiscal rules for member states.

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German constitutional court

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News


Unless there is a dramatic and simultaneous shift in the politics of Italy, Germany and the European Central Bank,
the collapse of the eurozone is all but certain. Neither Italy, Spain, Portugal, Ireland nor Greece will be able to maintain their membership in the eurozone,
and maintain sustainability of their sovereign debt at current interest rate spreads.
Wolfgang Munchau, Eurointelligence 9 September 2011

The author is president of Eurointelligence, and an associate editor of the Financial Times.

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Konstruktionen kring euron har inte varit fel
Euron är numera kärnan i det europeiska samarbetet.
Utan den reduceras samarbetet till ett frihandelsområde, mindre långtgående och mindre betydelsefullt än
den politiska union som med en gemensam valuta möter globaliseringens utmaningar.
Jan Björklund, Birgitta Ohlsson, Carl B Hamilton och Olle Schmidt, SvD Brännpunkt, 9 september 2011


Den gemensamma valutan ska räddas genom exit för de stater som gör euron sjuk. I den bästa av världar kan detta ske under ordnande former.
I verkligheten är det lätt att se ett kaotiskt förlopp som inte bara skulle slå hårdare mot ett land som Grekland,
utan som i den tätt tvinnade ekonomin skulle spridas vidare likt ringar på vattnet.
Claes Arvidsson, SvDs ledarsida 9 september 2011


The greatest fear is that one of the Continent’s major banks may fail, setting off a financial panic like the one sparked by Lehman’s bankruptcy in September 2008.
European policy makers, determined to avoid such a catastrophe,
are prepared to use hundreds of billions of euros of bailout money to prevent any major bank from failing.

New York Times, 7 september 2011

“This crisis has the potential to be a lot worse than Lehman Brothers,” said George Soros,
the hedge fund investor, citing the lack of an authoritative pan-European body to handle a banking crisis of this severity.
“That is why the problem is so serious. You need a crisis to create the political will for Europe to create such an authority, but there is still no understanding as to what the authority will do.”

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Lender of Last Resort

Lehman Brothers

Gunnar Hökmarks generande förslag om eurokrisen
Rolf Englund blog 7 september 2011


The worst of the euro crisis is yet to come
The most disturbing aspect about the eurozone right now is that
every crisis resolution strategy depends on a moderately strong economic recovery.
Wolfgang Münchau, FT September 4, 2011

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There is no provision in any European Treaty for a country to leave the eurozone.
That was deliberate.
It was intended to make it clear that the eurozone was forever – like the Soviet Union and the Holy Roman Empire.
Roger Bootle, Daily Telegraph 5 September 2011

But everywhere you hear the same refrain: how do you break up a monetary union? And if it cannot be broken up then surely it must hold together.

But in fact you cannot legislate for changing economic conditions or changes in peoples' attitudes.

For an exit from the euro by a single member country, or the split of the euro into two or more parts, not to be extremely messy, you need planning and careful forethought, requiring discussion and the exploration of possibilities.

Yet, to avoid precipitating a banking collapse, never mind other sorts of economic dislocation, you need absolute secrecy and surprise. After all, if people thought that such a change was coming they would try to withdraw money from vulnerable countries' banks and this could prompt a banking collapse and a serious economic crisis.

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Nu brådskar det att avveckla euron under ordnade former.
Alternativet kan bli att valutaunionen upplöses i ekonomiskt, socialt och politiskt kaos.
Jonas Sjöstedt, SvD Brännpunkt 2 september 2011

Rome, Habsburg and the European Union


Europe will not slide back into recession, and the euro remains "strong and resilient"
the president of the European Commission Barro said.
BBC 5 Septgember 2011

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Låt Grekland lämna euron
Italiens tillväxt är bland världens lägsta.
Under det senaste decenniet är det av samtliga världens länder bara Zimbabwe och Haiti som har haft lägre tillväxt.
Adam Cwejman, förbundsordförande Liberala ungdomsförbundet, SvD Brännpunkt 3 september 2011


Nu brådskar det att avveckla euron under ordnade former.
Alternativet kan bli att valutaunionen upplöses i ekonomiskt, socialt och politiskt kaos.
Jonas Sjöstedt, SvD Brännpunkt 2 september 2011


Even a joint bond might not save the euro
Two months ago, it was said the worst things that could happen were that the crisis would extend to Italy and Spain; and the economic recovery would stall.
Now the crisis has extended to Italy and Spain, and growth in the eurozone economy has slowed.
Wolfgang Münchau, FT August 28 2011

The eurozone bond is not something you can introduce in an emergency meeting at midnight tomorrow.
It requires new institutions. Eurobonds would require a change in European treaties. It would also require changes in various national constitutions.

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Eurobonds

We are near to the end of the eurozone in its present form.
Tim Congdon, Daily Telegraph 28 August 2011

The latest news from Greece is troubling. Its banks are so short of cash they have to borrow on an emergency basis from the European Central Bank, even though tens of billions of euros of special assistance has already been directed to its economy.

No one can predict the exact form or scale of the coming eurozone turmoil. However, the public debate in Germany about the cost of eurozone bail-outs suggests that a fundamental reappraisal of the single currency is under way.

We must be ready for a full-scale break-up of the monetary union.

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Tim Congdon

News

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Today's European leaders can't do anything about the original sin:
Creating a single currency without accompanying institutions of governance and fiscal policy.

But they repeatedly convene summits that do just enough to prevent catastrophe for another month and not enough to fix underlying problems
— and then hope the European Central Bank will rush to the rescue.
David Wessel, WSJ 25 August 2011

http://online.wsj.com/article/SB10001424053111904009304576528114076411924.html?mod=WSJEUROPE_hps_MIDDLEFourthNews

There are no cheap ways to speed the healing of housing.
Nearly every option is unfair, especially to those who didn't over-borrow.
Every big option has big drawbacks.
David Wessel, WSJ 25 August 2011

There's a lively debate about the merits of cutting government spending immediately,
but little evidence that doing so would boost U.S. growth.
"The idea that fiscal austerity triggers faster growth in the short term finds little support in the data," the IMFconcluded after a review of evidence
This is particularly true for today's U.S. economy. Interest rates can't fall much lower to offset government spending cuts.
Exports aren't as big a force as in smaller economies and thus can't compensate as much.
David Wessel, WSJ 25 August 2011

Johan Norberg varnar
Skuldkrisen i Europa är så allvarlig att vissa stater riskerar att helt kollapsa
23 Augusti 2011


Kunde vi rulla tillbaka Sovjetunionen skall vi väl kunna rulla tillbaka Europeiska Unionen
Klicka här

If the region's banks remain under pressure, however, the countries at the euro zone's core, in particular Germany and France,
will be left with no choice but to embrace the deeper fiscal union that they have rejected for more than a year.
If they don't, the common currency could collapse, thrusting the Continent into political and economic chaos.
Wall Street Journal, 19 August 2011

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In the normally quiet month of August we have seen these difficulties escalate so rapidly that little now stands between Europe and a decade of low growth, high unemployment, industrial decline and popular discontent, the nearest modern economic parallel for which is the 1930s.
It is an already lethal cocktail that becomes more deadly when mixed inside the euro, a currency created without the resilience to withstand difficult times and which has no structure for effective decision-making.
Gordon Brown, Britain’s prime minister from 2007 to 2010 and chancellor of the Exchequer from 1997 to 2007, New York Times 18 August 2011

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Readers have asked for a quick verdict on the Merkel-Sarkozy deal.
I have nothing to say. There was no deal.
No eurobonds, no fiscal union, no boost to the EFSF rescue fund, no change of policy on the ECB’s mandate. Zilch.
Ambrose Evans-Pritchard, August 17th, 2011

It was a vacuous restatement of clauses that already exist in the Lisbon Treaty, or an attempt to pass off retreads such as the Tobin Tax and harmonization of the corporate tax base as if they were new.

More fiscal austerity for laggards, without even the Marshall Plan we had on July 21. It is all a step backwards into the black hole.

The ECB can hold the line for now by purchasing €20bn of Spanish and Italian bonds each week. But once the ECB nears €150bn or so, the markets will brace for the next crisis.

Italy alone has to raise or roll-over €68bn by the end of September. You can be sure that a great number of investors will take advantage of ECB intervention between now and then to lighten their holdings, and switch the risk to eurozone taxpayers. The ECB may have to buy at least €100bn of Italian bonds alone by late September to cap the 10-year yield at 5pc.

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Italy

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Very Import Articles


French economist Jacques Delpla, who co-authored a paper proposing how eurobonds could work,
said the euro faced collapse unless leaders went beyond an agreement reached July 21
"If we just stick to the July 21 agreement then, before the end of the year,
there will be no euro zone, unless the ECB buys everything that's problematic."
CNBC 16 August 2011

See also: Trichet


The leaders of Germany and France can agree to fiscal fusion and an EMU debt union,
entailing treaty changes and a constitutional revolution.
Ambrose Evans-Pritchard, Daily Telegraph 14 Aug 2011
Nice pic of Sarkozly and Merkel

This implies the emasculation of Europe's historic nation states.

They can tear up the mandate of European Central Bank and order Frankfurt to go nuclear with €2 trillion of `unsterilized' bond purchases until the M3 money supply in Italy, Spain, Portugal, Ireland, and Greece stops contracting

Or they can try to muddle through with their usual mix of half-measures and bluster. This will lead to a rapid disintegration of monetary union and a banking collapse.

It risks a repeat of 1931 if executed badly, as it most likely would be.

What Italy has is a growth problem, rooted in currency misalignment. Having lost over 40pc in unit labour cost competitiveness against Germany since EMU, it is trapped in slump. Per capital income has contracted for a decade.

So why is Europe forcing Italy to tighten drastically and run an even bigger primary surplus within two years, and doing so just as the world flirts with a double-dip downturn?

The path of least resistance for Angela Merkel and Nicolas Sarkozy on Tuesday is surely to force the ECB to change course, by treaty power if necessary.
Or kiss goodbye to the Kanzleramt, the Elysee, and monetary union.

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Den nya beskyllningen mot Tea party-rörelsen är att den förstår samhällsekonomi i termer av hushållsekonomi.
Experterna skrattar åt denna naivitet
Poirier Martinsson, SvDs ledarsida 15 augusti 2011


The Franco-German plan is fundamentally flawed because it does nothing to address
the widening democratic deficit that has bedeviled the currency area since its inception.
Paul Hannon, Wall Street Journal 23 August 2011

If German Chancellor Angela Merkel and French President Nicolas Sarkozy get their wa y— and they almost always do — the 17 nations that use the euro will more closely coordinate their economic policies, and in particular their budgets.

This is a long overdue effort to mirror and complement the common monetary policy that has been in place since the launch of the euro in 1999.

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A new deutsche mark
Something terrible may happen,
but it's so terrible we can't even imagine what the consequences might be

Exactly how bad would things get if a significant number of the euro zone's members had to withdraw from the bloc and write off a significant portion of their debts?
Paul Hannon, Wall Street Journal 16 August 2011

Germany, Europe's strongest economy. In the wake of a break-up, it would be like Switzerland on steroids

A new deutsche mark, or a northern euro with France, the Netherlands, Belgium, Luxembourg, Austria and Finland attached—would appreciate very sharply against the now many more currencies circulating in Europe, and indeed any other currency. Which might make the Swiss happy.

Assuming the northern euro was the choice, would France, the Netherlands or anywhere else be able to endure a super-strong currency?

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More Very Import Articles


The risks of what Sir Mervyn King, the Governor of the Bank of England, on Wednesday referred to as
the “unimaginable and unmentionable”, by which he meant a disorderly breakdown of the euro,
are high and getting worse.
Jeremy Warner, Daily Telegraph 10 Aug 2011

At his Inflation Report press conference yesterday, Sir Mervyn said:
“2008 was not the end of the crisis. It was merely one stage in a bigger crisis. We are going through the next stage now.”

It will be years before the world economy cures itself of the debt overhang.

Deprived of the remedy of currency correction, and with no corresponding mechanisms to address the imbalances, creditor and debtor nations are ripping each other apart.

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Detta är skälen till att jag betraktar euron och EMU som ett felkonstruerat system.
Det som nu händer var väntat av oss euro-motståndare, valutarisken byttes ut mot en kreditrisk. Det var också anledningen till engagemanget på motståndssidan i den svenska euro-omröstningen, även om vi inte såg precis hur illa det skulle gå.
Villy Bergström har varit vice Riksbankschef. Han är socialdemokrat, Avanza bank 8 augusti 2011

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Slithering to the wrong kind of union
This time the consequence would be to threaten the collapse of the most successful project of economic integration in the history of mankind.
Otmar Issing, Financial Times, August 8, 2011


Om EMU:s föregångare, den s k Werner-planen
ur boken "Vår framtid i Europa" av Jan Brännström, Rolf Englund och Claes-Henric Siven
1971, för 40 år sedan, tänk vad tiden går

Det förutsätter en ändring av Romfördraget vilket givetvis förutsätter enighet mellan medlemsländerna. Det är knappast troligt att rapportens slutmål kommer att kunna realiseras. Allt för många sakliga skäl talar mot de föreslagna åtgärderna ...

Kravet på för evigt fixerade paritetskurser är inte realistiskt ... En låsning av valutakurserna innebär att prissystemet inte fullständigt kan fylla sin uppgift som koordinationsinstrument."

Läs mer här


Here is the statement by eurozone leaders.
http://www.consilium.europa.eu/

The agreement included new aid for Greece that embraced bondholders,
prompting Fitch Ratings to say it will put a default rating on Greek debt.
Bloomberg 22 July 2011

The risk is that the package will follow the pattern of previous agreements and eventually disappoint markets.

Leaders declined to increase the 440 billion euro ($634 billion) fund, prompting economists from Citigroup to Goldman Sachs
to question whether it’s big enough to insulate Spain and Italy from contagion.

“The European Financial Stability Facility has gone from being a single-barreled gun to a Gatling gun, but with the same amount of ammo,” Willem Buiter, chief economist at Citigroup Inc. told Bloomberg Television

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Reaktionen auf Griechenland-Paket
Der Spiegel 22 Juli 2011

Hier lesen


One step back from the abyss
Will it be enough? Of course not.
Stephanie Flanders, BBC Economics editor, 22 July 2011

The moment of no return, in any currency crisis, doesn't come when governments run out of options. It comes when governments run out of options that are politically possible - or credible. Think of the UK's own ERM crisis /1992/: the game was up when Norman Lamont raised interest rates to 15%to defend the currency peg, in the middle of the recession. Everyone knew that wouldn't wash.

nejtillemu.com/normanlamont

There is no word, yet, on whether the EFSF is going to get any bigger. It's a bit feeble to announce a major new tool for confronting market contagion, without saying explicitly that you are giving it more money as well.

Oklart var pengarna till Grekland ska tas ifrån
Den totala lånekapaciteten i EFSF ligger på 250 miljarder. Men både Irland och Portugal har redan fått lån därifrån och med det nya lånet till Grekland så är pengarna i fonden i praktiken slut.
Ekot 22 juli 2011

As the German economist, Christian Schultze, told me for my television bulletin on Thursday, Gemany is not ready for collective European bonds - or any big leap towards a full fledged Federal union. If that is really what saving the Euro requires, as George Osborne and Ed Balls have both suggested, then "the euro has a big problem"

You would think that Mr Osborne might have more sympathy for the Germans' reluctance to sanction a massive transfer of power from sovereign governments to the centre; a transfer which, by all accounts, would be expressly against the wishes of most of their citizens.

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So what's the EFSF then?
Emma Rowley, Daily Telegraph 22 July 2011

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Banks will reduce Greece’s debt by 13.5 billion euros by exchanging bonds and “potentially much more” through a buyback program still to be outlined by governments, said the Institute of International Finance, a Washington-based group representing banks.

Investors will have the option to exchange existing Greek debt into four instruments. Three will be fully collateralized by AAA-rated zero-coupon securities and have a 30-year maturity, and the fourth will be for 15 years and partially collateralized by funds held in an escrow account.

Crisis managers are aiming for a 90 percent participation rate from Greek bondholders

More at Bloomberg

Banks across Europe are braced to take as much as 17 billion euro ($24.5 billion) of
writedowns on their holdings of Greek sovereign debt within a matter of days.
Auditors have argued that the banks must take the hits now, given that almost
any scenario for dealing with Greek sovereign restructuring will impair the value of their bond holdings.

Financial Times via CNBC 22 July 2011, 12:45 AM ET

Up until now, most banks have not written down the value of the bulk of their Greek sovereign bonds. Bonds can be held in two buckets on banks’ balance sheets: trading books, which routinely mark the value of bonds to market, only hold a fraction of banks’ sovereign bond investments; the balance is in so-called banking books, which are routinely held to maturity and are therefore not traditionally marked to market, ignoring plunges in bond values as a result.

The current risk weightings for sovereign bonds under the Basel II framework for the standardised approach - used by many smaller banks - give a zero risk weighting to instruments with a AAA to a AA- credit rating. At the moment, 31 nations are rated in this bracket by Standard & Poor's, including Ireland and Spain. Italy has a A+ and Portugal carries a A- credit rating, which under the Basel rules attracts a 20% risk weighting

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Imposing capital requirements is easy, but what is capital and what are real risk assets?
Basel III wants to strengthen banks capital ratios, but seems rather slack regarding what is a risky asset.
Basel III, by categorizing sovereign debt as risk-free, is doing precisely the same thing. Except instead of the $10 trillion U.S. mortgage market, now we’re talking about the more-than $50 trillion of sovereign debt worldwide
zerohedge

Mark to market


"Det gäller bara Grekland", Mycket fiffigt,
Too clever by half, men allt var fel från början

Rolf Englund blog 22 juli 2011


Eurozone agrees new Greek bailout
In Germany, Commerzbank climbed almost 9% and Deutsche Bank rose 3.6%,
while in France Societe Generale and Credit Agricole gained about 6%.

German and French banks are the biggest holders of Greek debt.
BBC 21 July 2011


– Det är klart att när det har varit så mycket osäkerhet och så mycket problem i euroområdet så
har det ju inte varit en nackdel att stå utanför det.
Sedan är det alltid bra om Sverige sitter med vid borden.
Men euroländerna betalar ju nu ett högt pris för att de här systemen inte har fungerat bra.
DN/TT 21 juli 2012


It appears that the eurozone is forcing Greece into a selective default.
As part of such a package, short-term Greek debt will be more or less forcibly converted into long-term debt.
But the problem of the eurozone is not Greece, or some other small country on its periphery.
The existential danger is the rise in market interest rates of Italy and Spain, two large countries in the eurozone’s core.

Wolfgang Münchau, FT, 21 July 2011, Updated at 15.00 London time

This would be a default, the first by a western industrialised country in a generation.
I am not quite sure how it is possible for the European Central Bank to agree to this, or to all of this.

But I will surely be intrigued to hear how Jean-Claude Trichet will manage to be consistent with what he said a few days ago.

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How do the credit ratings agencies decide whether a Greek restructuring plan constitutes a default?
Who are the decision makers? And what criteria do they use to make such a decision?

WSJ, JULY 21, 2011, 1:30 P.M. ET


1937! So demand will be depressed in both crisis and non-crisis economies;
this will lead to a vigorous recovery through … what?
Paul Krugman, July 21, 2011, 11:51 AM


STATEMENT BY THE HEADS OF STATE OR GOVERNMENT OF THE EURO AREA AND EU INSTITUTIONS
A draft of the proposal document has been leaked from the eurozone summit in Brussels
Daily Telegraph 21 July 2011, 2:40PM BST


Preliminärt utkast från torsdagens EU-toppmöte som Reuters tagit del av.
Dagens IndustriTT 2011-07-21 15:04

Greklands lån från EFSF att förlängas till åtminstone 15 år, från dagens 7,5 år.
Räntan för de nya lånen från EFSF kommer att vara kring 3,5 procent jämfört med dagens kring 4,5 procent.

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While Merkel and Sarkozy were all smiles for the photographers when they met in Berlin last night the French president told his confidents what he really thinks of the German chancellor.
“The only ones, who totally lack all solidarity, are the Germans. The German egotism is criminal. It reinforces the crisis”,
he said according to Le canard enchainé, the always well informed French satirical weekly.

But Sarkozy also hit out at Jean-Claude Trichet’s refusal to accept any Greek government bonds should the summit solution lead to a selective default or a default.
Trichet is taking a radical position which according to Sarkozy is an easy thing to do if you are preparing to leave the scene for retirement.

“Trichet’s strategy is Belgian roulette”, he said according to Le canard enchainé.
“It is Russian roulette when there is one bullet in the revolver. It is Belgian roulette when all the bullets are there.”

Eurointelligence 21 July 2011


The accord between the two most powerful states in the euro zone
will be presented to a crisis summit in Brussels on Thursday starting at 1100 GMT
Reuters 21 July,12:46am EDT


Germany and France reach Greek accord
Germany and France appeared to settle their differences late on Wednesday
Financial Times, July 21 2011,12:03 am

No immediate details were available but Steffen Seibert, a spokesman for Angela Merkel, the German chancellor, said “a common German-French position” had been agreed.

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Merkel and Sarkozy “listened” to the views of Trichet, the statement said
without saying whether Trichet, who opposes any Greek default, shares their agreed stance.
Bloomberg, July 21, 2011 4:00 AM GMT+0200


Time is running out for salvaging Greece and, beyond it, Europe’s shared currency, the euro.
Thursday’s emergency summit meeting looms as a Lehman Brothers moment.
New York Times editorial 20 July 2011

If Europe’s leaders fail to extricate Greece from its current unsustainable debt-servicing obligations — by lowering interest rates and lengthening maturities at a minimum — the market reaction, for all of Europe, may be unforgiving, and uncontainable as investors conclude that no European sovereign debt is safe from possible default.

Chancellor Angela Merkel of Germany says bank creditors must first agree to a partial write-down of their loans to Greece. That would certainly be fair. But there’s no time for that fight right now

France’s president, Nicolas Sarkozy, has argued for swapping some of the Greek debt held by French banks for longer maturities. That offers some relief to the French banks but none to Greece, and rating agencies would likely label it partial default.

No solution is possible unless Chancellor Merkel steps back from her unrealistic insistence that Greece’s bank creditors first bear some of the cost of any debt restructuring.

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Euroledarna rådvilla som nakna kejsare
Ambrose Evans-Pritchard
Rolf Englund blog 20 juli 2011, 22:35


With Italian and Spanish debt yields ever higher, Thursday’s emergency summit offers perhaps the last chance to address it.
If a credible and comprehensive plan to do so does not result, the hour of the euro may well have passed.
FT, Lex, July 20, 2011 12:05 pm

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In an added sign of mounting anxiety ahead of a European Union summit meeting on Thursday,
borrowing from the European Central Bank rose sharply Tuesday,
indicating that many banks were having trouble raising money on open markets.

New York Times 20 July 2011

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Ingen bankskatt inom EU
Ekot 21 juli 2011, 11:16 (publicerades kl 09:45


It looks like Jean-Claude Trichet and the financial markets have scared the European negotiators,
who will tonight narrow down their list of options into a single proposal for European leaders to rubberstamp at their meeting tomorrow.
the favourite now seems to be a bank levy, imposed in such a way that it would raise the desired €30bn over three years.
Eurointelligence 20 July 2011

But a bank tax, or bank levy, is not going to be easy to implement. For a start, as the FT reminds us in its main story this morning, this cannot be implemented eurozone-wide. This has to be done country-per-country.

Germany’s experience with a bank levy, introduced last year, is not encouraging. The FT quotes a crisis as saying that the plan is unworkable, as it would require all eurozone countries to pass new tax legislation, while it would be impossible to target taxes on specific banks holding Greek bonds.

...

Ny EU-skatt fel lösning på grekiskt slöseri
Karl Sigfrid (M), SvD Brännpunkt 20 juli 2011 kl 04:45

I morgon samlas Europas finansministrar till krismöte om Grekland. På agendan finns ett förslag om att införa en EU-skatt på banker.

Sverige måste tydligt klargöra att detta är helt otänkbart

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Karl Sigfrid arbetade under folkomröstningen om EMU på Medborgare mot EMU.
Wikipedia


French President Nicolas Sarkozy was to meet Merkel on Wednesday in Berlin
U.S. President Barack Obama spoke with Merkel on Tuesday.
CNBC 20 July 2011, 3:32 AM ET

"They agreed that dealing effectively with this crisis is important for sustaining the economic recovery in Europe as well as for the global economy," the White House said in a statement.

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Stephanie Flanders, BBC Economics editor:
But how, exactly, would the euro break up?
Rolf Englund blog 20 juli 2011


European officials are considering a tax on financial institutions
according to an EU paper obtained by Bloomberg News.
The one-page document,

dated July 16, lays out three ways to construct a Greek rescue that includes the involvement of private companies.
Bloomberg, July 19, 2011, 6:23 PM EDT

In addition to a bank tax, “Option Three” could also include a voluntary rollover of Greek debt.

The other two proposals are likely to involve some form of default, the document said.

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A meeting of euro zone leaders on Thursday will not be the final step in the resolution of Greece's debt crisis
"There are other necessary steps to take and not one spectacular result that will solve all problems,"
she /German Chancellor Angela Merkel/ said at a joint news conference with Russian President Dmitry Medvedev.
CNBC 19 July 2011, 9:23 AM ET

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Either a deal is at hand and the town’s leading journalists don’t know about it – or we’re still a long way off with just 48 hours to go.
Financial Times Brussels Blog is betting on the latter July 19, 2011 9:59 am.


The euro zone's strategy for dealing with its members' fiscal problems is in tatters,
and it is far from certain that its leaders will be willing and able to come up with a more successful alternative when they meet Thursday.
If they don't, the currency area won't survive
Wall Street Journal 19 July 2011

So what went wrong? Essentially, from being a series of national crises, the fiscal problems facing some of its members became a crisis of the currency area around about October last year, with the German government's public call for private-sector participation in the resolution of any future crises.

It may have been well intentioned, but it was most certainly naive. Not for the first time, euro-zone policy makers demonstrated their lack of understanding of how financial markets work.

Having assumed that no euro-zone government would ever be allowed to default on its debts, investors quickly concluded that a default would be the only way continued support for weak members could be justified to German tax payers.

They became extremely averse to holding bonds issued by governments that might in the future need help, tipping both Ireland and Portugal over the edge.

In short, it seems unlikely euro-zone leaders will have any answer to the contagion problem.

This means Spain and Italy will lose access to bond market funding, increasing the risk that what started off as a series of fiscal problems affecting a rather small part of the euro-zone economy will end up destroying the entire currency area.

Read more here

This could even involve a country taking a sabbatical from the eurozone
in order to regain the policy flexibility needed to restore competitiveness
Mohamed El-Erian, Pimco, Financial Times 15 July 2011

Peripherals implementing courageous austerity measures have been losing the support of citizens who feel, rightly, that their sacrifices have done little to improve prospects for their country.

For too long, Europe has pretended that the crisis in its periphery was liquidity-driven rather than solvency-induced. Officials dismissed the need for debt restructuring, preferring a bail-out for Greece, Ireland and Portugal that piled new debt on top of an already unsustainable burden.

Europe could opt for greater fiscal union, first de facto and then de jure. Individual countries would sacrifice a significant amount of national sovereignty and fiscal policy discretion. If this is politically impossible to implement, and I suspect it may be, Europe should opt for a restructuring of the debt of the weak peripherals, recapitalising the ECB...

At some stage, this could even involve a country taking a sabbatical from the eurozone – but not the EU - in order to regain the policy flexibility needed to restore competitiveness.

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...

Det är kostnadsläget, stupid.
Mohamed El-Erian, Pimco, och Tomas Lundin, SvD Näringsliv, är ense
Rolf Englund blog 19 juli 2011


It will help if Angela Merkel and Jean-Claude Trichet end their increasingly pointless squabble over private sector involvement in a Greek debt relief package.
But it will not transform Greece’s prospects for escaping from its debt trap, and it will not touch the heart of the matter
– that Europe faces not a mere liquidity problem in a small, sun-kissed Mediterranean state, but a systemic crisis of its monetary union.
Financial Times editorial 18 July 2011

The risks to the European banking system, with its intricate patterns of multibillion-euro, cross-national loans and investments, are correspondingly high.

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...

Trichet:
“The governments have been warned, in no uncertain terms and using all possible means. I have said so publicly.
I have explained in detail to the Heads of State and Government and to the finance ministers, on several occasions, that, if a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral.

...

For Schäuble, the euro crisis is an opportunity to finally realize his plan for a political union.

"Europe is like a bicycle. If you stop it, it will fall over," he said in a keynote speech in Paris in December, quoting the great European Jacques Delors.

Schäuble never believed that a common currency could work without political cooperation. He has been pushing Merkel in this direction behind the scenes, but she has been hesitating and dithering.

Göran Persson: Vi går mot en europeisk federation
Det kanske ligger 30 år bort, men det är inte lång tid när vi talar om den här typen av stora förändringar"
Dagens Industri 14 juli 2011

/Men varje 5-åring vet ju att det är mycket lätt att få stopp på cykeln utan att ramla.
Man bromsar och sätter ner foten.
Likadant är det med EU. Man skall bromsa och sätta ned foten.
Rolf Englund i Nya Wermlands-Tidningen 2002-03-01/

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Officials in Germany's Finance Ministry are analyzing several models for paring down Greece's debt burden to a more tolerable size. This would involve relieving the country of roughly €70 billion (SEK 648 milljarrder) in debt.
Der Spiegel 18 juli 2011

"We are searching through our entire arsenal for a fundamental solution to the problem," said one official close to Finance Minister Wolfgang Schäuble.

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Five years ago, I was among those who argued that the probability of a collapse of the eurozone was close to zero.
Last year, I wrote it was no longer trivial, but small.
I now would put the odds of a break-up of the eurozone at 50:50.
As I argued last week, a eurozone bond is the only solution to the crisis.
Wolfgang Münchau, Financial Times 18 July 2011


Europe’s political leadership has been, and still is, committing a category error in its approach.
This is not a crisis of a small country at the edge of the eurozone. Nor is this a crisis brought on by rating agencies or speculators.
This is a systemic crisis of a monetary union that refuses to be a fiscal union.
Wolfgang Münchau, Financial Times 18 July 2011

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A modest proposal
The eurozone can in theory still be saved, if two sets of conditions are fulfilled;
if the leaders of Germany, Austria, Finland, and the Netherlands accept fiscal union and a common pooling of debt, and can persuade their parliaments and courts to ratify such a revolution.
Given that these sovereign diets will not efface themselves lightly, the wise course is to prepare for an orderly break-up of monetary union.
Ambrose Evans-Pritchard 17 July 2011

Only one option can be orderly. Germany and its satellite economies must withdraw from EMU, leaving the Greco-Latin bloc with the residual euro and the institutions of monetary union. Let us call the legacy group the "Latin Union" in memory of its 19th Century forebear.

Once the dust had settled, it would become clear that Italy, Spain, Ireland, and perhaps Portugal had regained enough competitiveness to hope to grow their way out of debt traps.

The alternative is to impose austerity and debt deflation without offsetting relief – à la grecque – on a string a countries until their polities shatter, and capital flight sets off disorderly EMU exit by the weaker states, with a concomitant chain of defaults reaching Italy, the world's third biggest debtor.

As the bond jitters of the last two weeks have shown, we are already uncomfortably close to this.

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A Modest Proposal, Wikipedia

"ever closer union"


How to save the eurozone
In short, the approach of lending more and more from the official sector to countries
that cannot access the market at premium rates of interest is unsustainable
Lawrence Summers, Financial Times, 18 July 2011

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Lawrence Summers


“The governments have been warned, in no uncertain terms and using all possible means. I have said so publicly.

I have explained in detail to the Heads of State and Government and to the finance ministers, on several occasions, that, if a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral.

The governments would then have to step in themselves to put things right. That would then be their duty”, he said.

Trichet reiterated that the ECB will not accept as collateral bonds from a nation that defaults.
“Naturally the Europeans can manage the issue,”
“It is not a question of technique. It is a question of will and determination.”
Bloomberg 17 July 2011

Trichet said the euro is not in danger and remains “a highly credible currency.”

He reiterated that the ECB will not accept as collateral bonds from a nation that defaults. “If a country defaults, we can no longer accept as normal eligible collateral defaulted bonds issued by the government of that country,” Trichet said. “Because, in the eyes of the Governing Council, this would impair our ability to be an anchor of confidence and stability.”

Trichet said in an interview with the Financial Times Deutschland, according to a transcript released by the Frankfurt-based ECB.

Full text at Bloomberg

As German Chancellor Angela Merkel flirts with solutions to the Greek crisis that rating companies say would amount to a default, Trichet says leaders can’t repeat the mistakes made by U.S. officials when they let Lehman Brothers Holdings Inc. fail.
“No credit event, no selective default, no default,” Trichet said at a press conference in Frankfurt yesterday.
Bloomberg 8 July 2011

Eurogruppens ledare Jean-Claude Junker och Jean-Claude Trichet, chef för den Europeiska Centralbanken ECB
SvD Näringsliv 13 juli 2011


Soon the euro zone may well have to expand the EFSF and allow it to issue jointly guaranteed “Eurobonds”.
It is not a pleasant option. But the alternative could be the end of the euro.
The Economist print editorial, July 14th 2011

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What EU leaders once ruled out — a default by a euro-zone nation — has firmly entered the sphere of the possible
Top euro-zone politicians, engaged for months in a string of meetings that have failed to bring agreement on how to provide more aid to Greece, are trying furiously to stamp out the flames of contagion licking at Italy and Spain
Wall Street Journal 14 July 2011

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The eurozone might be on the verge of a fiscal cum financial crisis that destroys not just the solvency of important countries
but even the currency union and, at worst, much of the European project.
Martin Wolf, Financial Times, 12 July 2011

In Europe, politicians are dealing with the legacy of a utopian project which requires a degree of solidarity that their peoples do not feel.

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Europas ledare möts och pratar, men någon ordning på eurokrisen får de inte.
Röran på finansmarknaderna fortsätter och gäller inte bara Grekland.
Räntetrycket hårdnar även på Italien och Spanien.
DN-ledare signerad Gunnar Jonsson, 13 juli 2011

Efter månader av villrådighet verkar eurozonens finansministrar ha fått klart för sig att Greklands skuldberg måste trimmas, men är inte överens om hur.

Italien är eurozonens tredje största ekonomi, men delar defekter med andra Medelhavsländer. Tillväxt och produktivitet har sackat efter EU-snittet sedan euron infördes. Den offentliga sektorn är överviktig, de sociala förmånerna frikostiga. Skattesmitning och svartjobb är specialiteter.

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Some of Europe's biggest banks are taking steps to shore up their defenses
should the debt crisis spiral out of control

and one or more countries leave the euro zone
Wall Street Journal 13 July 2011

Some banks recently have been reining in some cross-border lending to companies in countries like Spain and Italy, bank officials say. Others are parking more money with the European Central Bank, according to ECB data. Banks also are increasing their use of credit-default swaps as protection against their holdings of sovereign debt from shaky countries.

The moves reflect mounting concern that Europe's political leaders lack the will to adequately address the Continent's problems. The worries have shifted from concerns that Greece may default on its debts to a more dramatic scenario where Greece or another country departs the currency bloc.

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Friday emergency summit meeting
The acknowledgement of a possible Greek default marks a potential turning point
It came after two days of meetings in Brussels, and against the fierce opposition of the ECB,
which fears that such an occurrence could unleash further turmoil in financial markets and spread contagion
Financial Times July 12, 2011 9:56 pm

Herman Van Rompuy began making arrangements to summon European leaders to Brussels on Friday for an emergency summit meeting.

Several diplomats cautioned that Mr Van Rompuy’s calls were hasty, and that it remained unclear whether an emerging consensus could be translated into a binding legal agreement on such short notice.

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For the record
In the absence of a policy response, the eurozone’s financial system may implode within a few days.
Eurointelligence 12 July 2011


Very funny, Do Read!
Debt Crisis Lost in Translation. Until Now
"Ministers reaffirmed their absolute commitment to safeguard financial stability in the euro area."
Means: Thanks for hanging around until midnight, but we really haven't got anything to tell you.
Silvia Wadhwa, CNBC Europe Reporter, 12 Jul 2011

"Ministers discussed the main parameters of a new multi-annual adjustment program for Greece, which will build on strong commitments to fiscal consolidation, ambitious growth-enhancing structural reforms and a substantial privatization of state assets."

Means: Don't bother asking questions about details; we haven't agreed on any. And take your cue from ambitions, which usually means unrealistic.

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"en viss default"
"Första tecknet på att Euro-gruppen kastar in handduken"
Banker kan tvingas betala för Greklandskrisen
Ekot 11 juli 2011

Europas ledare är för första gången beredda att acceptera en viss default av grekiska statspapper. Det skulle innebära att privata finansiärer förlorar pengar på lånen till Grekland.

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Trichet says leaders can’t repeat the mistakes made by U.S. officials when they let Lehman Brothers Holdings Inc. fail.
“No credit event, no selective default, no default,” he said

Once again Europe's debt crisis has metastasized, and once again the financial authorities face systemic contagion unless they take immediate and dramatic action.

What it will take is a belated recognition by Germany that this crisis is not a morality tale contrasting virtuous, thrifty Teutons, with feckless Greco-Latins and Guinness-befuddled Celts, but rather a North-South structural crisis caused by the inherent workings of monetary union.

The implications of this are profound.

Germany must now be willing either to buy or guarantee Spanish and Italian debt,
and in doing so to cross the Rubicon to fiscal and political union,
or accept that EMU must break up with calamitous consequences for German foreign policy.
Ambrose Evans-Pritchard, 10 July 2011

Large matters, beyond the intellectual vision of Germany's current leaders.

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Tyskland

Ever Closer Union - EBU

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The cost of insuring Italian debt rose sharply after the country’s trusted Finance Minister became linked to a corruption scandal
There would be huge repercussions if Italy was badly affected because its economy makes up 16.7 per cent of eurozone GDP, compared with 2.4 per cent by Greece and 1.8 per cent by Portugal.
The Times 9 July 2011


Despite the brave efforts of their governments and people,
few serious economists now deny that Greece, Portugal and Ireland will, at some stage,
need a big reduction in the amount of debt they owe or a large cut in the interest rate that they have to pay.

The Times, editorial, 7 July 2011

It is quite understandable that eurozone governments and the European Central Bank are not hurrying to make the necessary adjustments.

Most bankers believe that the European financial system is robust enough to handle the fallout, not least because it has had plenty of time to prepare.It it most unlikely to precipitate a Lehman-style crisis.

But there is no denying that the complexity of the interconnections between eurozone government and bank debt means that nobody can really be sure.

Meanwhile, the debt adjustments will require eurozone governments to bear some of the costs, which will be extremely unpopular, not just in Germany.

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The ECB’s worst nightmare
Queues outside banks
Gavyn Davies, Financial Tmes July 7, 2011

The ECB is now financing around 20 per cent of the balance sheets of Greek and Portuguese banks, and has a total exposure to the troubled economies in excess of 400 bn euro.

The capital and reserves of the European System of Central Banks is only 81 bn euro, so recapitalisation of the central banks could easily become necessary.

As if that were not enough of a problem, there are signs of a further, and even less controllable, problem emerging. Ordinary bank depositors in Greece and Ireland are beginning to shift their money out of the retail banks.

As the UK government found in the case of Northern Rock, the appearance of queues outside banks is one of the worst nightmares which a central bank can face. It has not happened in Europe – yet.

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One Sunday in October 2008, Alistair Darling flew back from Washington to find Britain on the brink of banking meltdown. The chancellor was told by his Treasury officials that unless a rescue plan was announced by the time the City opened for business the following morning, there was no guarantee that cashpoints would work and that cheques would be honoured.

The possibility of global financial implosion concentrated minds wonderfully; bailout plans were announced that ensured disaster was averted.

Read more here

---

A run on a bank occurs when a large number of depositors, fearing that their bank will be unable to repay their deposits in full and on time, simultaneously try to withdraw their funds immediately.

Bank run, Wikipedia

Nationalisation of Northern Rock, Wikipedia

Bank Runs, by George G. Kaufman

Nice pics of bank runs, Google

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Eventually, governments pursuing ever more austerity
with little or nothing to show for it throw in the towel.
WSJ 8 July 2011

In their seminal study of sovereign defaults, "This Time Is Different," U.S. academics Carmen Reinhart and Kenneth Rogoff showed that the most usual way for governments to escape crippling debt is to renege. Bond market yields suggest investors are almost certain of Greek and Portuguese defaults over the next couple of years.

Keynesian economists have long argued that the ECB's focus on inflation is wrong-headed and ultimately self-defeating. In part, that's because in seeking to pursue monetary policy to suit Germany and other core economies it is condemning the periphery to debt deflation.

Apart from their debt burdens, the fundamental problem with these economies is that they're not competitive relative to Germany.

To regain competitiveness, they need the cost of German labor and other inputs to rise faster than their own.

"This Time Is Different"

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Greece, Ireland and Portugal
The rescues are failing
Financial Times editorial 6 July 2011

The Greek rescue and the European financial stability facility were meant to tide countries over until private lenders recovered from a temporary panic.
It has turned out that the panic is chronic.

Yields on the sovereign obligations of Greece, Ireland and Portugal remain near record highs.
This does not mean that these countries’ plans for securing the sustainability of their public finances are unbelievable.

But it does mean that markets do not believe them.

In this sense, the rescues are failing.

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Nice, sort of, chart of Youth Unemployment
Sverige mellan Frankrike och Rumänien
The Economist 5 juli 2011


Moment of truth for the eurozone
Martin Wolf, Financial Times, 5 July, 2011

The biggest question in any debt crisis is whether a credible path back to solvency can be found. For Greece, this now seems very unlikely. The same is true, to a lesser extent, for Ireland and Portugal. This raises three further questions. First, how big is any required restructuring? Second, who should bear the cost? Finally, is restructuring enough? If the answer to the last question is No, then one has to ask whether the currency union will last in its current form.

At some point, the present value of the cost of debt must be drastically lowered. This does not have to happen today. But it has to happen soon enough to give people hope. In its absence, failure is not just likely. It is close to a certainty.

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Martin Wolf

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The EU authorities are attempting to muzzle free opinion, threatening Fitch, Moody’s, and S&P with vague retribution
Currency unions switch exchange risk into default risk
Agencies totally failed to signal the inherent dangers of EMU a long time ago
They handed out AAAs like confetti
Ambrose Evans-Pritchard 7 July 2011

Currency unions switch exchange risk into default risk.

States with their own sovereign currency and debt in their own currency can let the exchange rate take the strain when they get into trouble, as the US and the UK have done. Foreign investors lose money on the exchange rate.

This not the case at all for EMU laggards. They cannot devalue or inflate away debt. The stress shows up in the bond markets instead.

The more relevant comparison in this respect is between the Euroland’s Club Med states and California.
California is A- and may lose that soon enough.

My gripe against the agencies is not that they are downgrading all these semi-bankrupt states today, but that they totally failed to signal the inherent dangers of EMU a long time ago when the crucial investment decisions were being made.

They too were swept up by euro euphoria. They too failed to understand the inherent structure of monetary union, or to spot obvious warning signs as the drama unfolded and the North-South divide became ever-more apparent. They handed out AAAs like confetti.

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Trichet says leaders can’t repeat the mistakes made by U.S. officials when they let Lehman Brothers Holdings Inc. fail.
“No credit event, no selective default, no default,” he said at a press conference in Frankfurt yesterday.
Bloomberg 8 July 2011


The ECB’s worst nightmare
Queues outside banks
Gavyn Davies, Financial Tmes July 7, 2011


Jan Kees de Jager, the Dutch finance minister
wants to force participation of private bondholders, irrespective of what the rating agencies say.
“I think we have to accept that a voluntary contribution is unrealistic... If a mandatory contribution from the banks leads to a short-term and isolated rating event, that is not so bad, because Greece cannot go to the credit markets anyway now or in the near future.”
Eurointelligence 8 July 2011

Mr Trichet hardened the ECB’s line on defaults during his press conference. He said one should not presume that private sector involvement was normal.

Of course, a default rating would not affect Greece’ access to capital markets right now, but as we have seen in the last few days, fear of a default spreads like wildfire.


Möte på torsdag mellan Frankrikes nye finansminister Francois Baroin och hans tyske kollega Wolfgang Schäuble
Målet är att en fjärdedel ska komma från privata eftergifter, men kreditvärderare har hittills sågat alla förslag.
Förutom grekiska banker är det främst tyska och franska banker som via obligationer i portföljen är exponerade mot den grekiska skuldkrisen.
DN/TT 7 juli 2011

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Greece, Portugal and Ireland
Most economists, in fact, any serious observer of the situation,
says there will be no solution without a major reduction in the debt of the governments in trouble
The only question is whether private investors will bear the loss or European governments will
Stephanie Flanders, BBC Economics editor, 6 July 2011

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Wolfgang Schäuble, German finance minister, said a rethink was needed
as talks about “a quantifiable private-sector contribution... had produced no result”
Financal Times, 6 July 2011

Just as eurozone governments and banks appeared to be coalescing around a French-led plan for a piecemeal rollover into new 30-year bonds, Wolfgang Schäuble, German finance minister, said a rethink was needed as talks about “a quantifiable private-sector contribution... had produced no result”.

Wednesday’s meeting debated tweaks to that plan – extending the rollover target percentage and cutting the coupon potentially to below 6 per cent. But participants said little headway was made. “There was a lot of confusion, it was very chaotic,” said one. “A lot of people spent a lot of time just stating their opinion.”

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S&P and Moody’s
"likely a default under our criteria", Moody’s "will only comment on a scheme, once it has been decided"
not a Brady bond. It is a rollover plan
Eurointelligence 5 July 2011

S&P said in a statement: "It is our view that each of the two financing options described in the (French banks') proposal would likely amount to a default under our criteria."

Moody’s issued a terse note saying that it was not party to any ongoing discussions. Moody’s will only comment on a scheme, once it has been decided. Ewald Nowotny, the Austrian central bank governor, made an interesting comment, according to Reuters, saying that the ECB had been in discussions with the rating agencies, and found that attitudes had hardened. He said he was struck by the fact that the agencies were tougher now than they were in respect of the Latin American Brady bonds.

(But this French banking association proposal is not a Brady bond. It is a rollover plan, with an element of collateralisation.)


"Default", kallas det bland kreditvärderare, när en låntagare saknar betalningsförmåga.

Skulle Grekland brännmärkas med "default" av S & P eller Fitch kan den grekiska skuldkrisen förvärras snabbt.
Bedömare befarar en akut likviditetskris på kreditmarknaden långt utanför Greklands gränser, som när Lehman Brothers gick omkull 2008
DI 4 juli 2011

Bland annat kan Europeiska centralbanken (ECB) i ett sådant läge sluta ta emot grekiska obligationer som säkerhet för lån.

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S&P said this morning a French plan to allow Greece to voluntarily change the terms on some of its debts when they come up for repayment would, "likely amount to a default under our criteria".
Daily Telegraph 4 July 2011

French banks, which hold some of the biggest exposures to Greek government debt, want to allow the country to extend the maturity of its bonds, which S&P said could be defined as a "selective default".

The default threat came as Greece was told yesterday by the chairman of the Eurogroup of finance ministers that it must privatise assets on a scale similar to the sell-off of East German companies at the fall of the Berlin Wall to rebuild its finances.

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The Greek rollover pact is like a toxic CDO
By Wolfgang Münchau, Financial Times 4 July 2011

This isn't just a mortgage or housing crisis.
At the center of this still-unfolding disaster is the collateralized debt obligation, or CDO.
Steven Pearlstein, Washington Post, December 10, 2007


The alleged case of a successful internal devaluation — that of Latvia
Could the Eurozone Break Up?
Possible Over a Five-Year Horizon

Nouriel Roubini via John Mauldin 18/6 2011

Paradoxically, the early interest rate convergence became damaging as it allowed a severe lack of fiscal discipline in some countries (such as Greece and Portugal) and the build-up of asset bubbles in others (such as Spain and Ireland).

Moreover the lack of market discipline delayed the necessary structural reforms and led to divergences in wage growth relative to productivity growth, and thus a rise in unit labor costs in the periphery and a loss of competitiveness that led to economic divergence between the PIIGS and the core. And the straightjacket of common monetary and currency policy exacerbated the real growth divergence at a time when structural and fiscal policies diverged.

Any successful monetary union has eventually been associated with political and fiscal union. Political union in the EZ and EU has stalled and a backlash against anonymous Brussels bureaucrats imposing their views on nation states is brewing.

A fiscal union would require that a significant amount of federal/central revenues be mobilized for the provision of EU/EZ-wide public goods, but there is no mechanism or will to provide the EU with enough power to create a semi-federal system of taxation, transfers and spending.

The alleged case of a successful internal devaluation — that of Latvia —is not relevant here: Entering the crisis, its public debt was 9% of GDP, not the 100%- plus of Greece; losses from depression and deflation were taken by foreign banks dominating its banking system; and accepting a draconian 20% fall in output was politically feasible as Latvia did not want to fall into the arms of the Russian bear again.

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Latvia

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German Banks ask for state guarantees as a condition for private sector involvement
This is a quite a funny story.
The German banks are willing to share the pain for a second Greek rescue package but only it there are state guarantees,
Financial Times Deutschland reports, Eurointelligence 21 June 2011.

The bosses of the lobby groups for private and public banks (BdB and VÖB) asked for “certain assurances” adding that “waiting on purely voluntary help without conditions will not lead to success”. The request would render Wolfgang Schäuble’s request of public sector involvement (PSI) absurd because in the end it would be the taxpayer who shoulders the burden.

Financial Times Deutschland


Recent public commitments stating the EU would ensure Greece remains solvent through next year were thought to be enough to secure the backing of the IMF
But amid continuing disagreement between eurozone countries over the terms of a new bail-out, IMF officials told the emergency gathering they needed firmer commitments before making the payment
Financial Times 20 June 2011

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IMF's statutes stipulate that the organization can only lend a country money if it is certain that the state will be able to meet its payment obligations for the next 12 months.
The new report has now made it clear that Greece is not in a position to guarantee that, meaning that the IMF cannot transfer any more money
Der Spiegel, 9 June 2011

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Time for Plan B
How the Euro Became Europe's Greatest Threat
The currency union chains together economies that are simply incompatible.
SPIEGEL Staff 20 June 2011

Part 1: How the Euro Became Europe's Greatest Threat

If the current situation continues, the monetary union will invariably turn into a transfer union, a path the inventors of the euro were determined to prevent.

There is no emergency exit, and there are no rules to follow in an emergency -- only the hope that everything will turn out well in the end. This is why the crises of a few euro countries are a crisis for the euro, as well as a crisis for the European Union, its governments and its institutions.

The fact that the countries funding the bailouts are lacking democratic legitimization is now becoming the greatest impediment to joint crisis management

The euro, created with the aim of permanently uniting Europe, has become the greatest threat to the continent's future. A collapse of the monetary union would set Europe back by decades, dealing it a blow from which it might never recover

Part 2: The Euro Is a Fair-Weather Construct
Part 3: A Clear Market Reaction
Part 4: German Banks, Insurers Unload Greek Bonds
Part 5: Berlin Expecting the Worst

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USA:s president och alla vi andra borde inte bekymra oss om Liran och Drachman
Rolf Englund blog 21 juni 2011


Germany's chancellor wants "a substantial contribution" from private creditors
who are due to be repaid some €64 billion by 2014.
If those creditors baulk but are nevertheless coerced into rolling over their loans,
enter the credit agencies and the ECB, for both of whom a forced rollover is, dare we say it, a default.
Irwin Stelzer, director of economic policy studies at the Hudson Institute, WSJ 20 June 2011

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Why spend seven hours behind closed doors, only to decide to wait and see?
After seven gruelling hours in Luxembourg, which included a video conference with colleagues from G7 countries, the finance ministers of the 17 countries of the euro zone decided to delay until July the disbursement of €12 billion ($17 billion)
Charlemagne's notebook, The Economist June 20th 2011

Why spend seven hours behind closed doors, only to decide to wait and see?
Because, Mr Juncker said, figuring out how to squeeze out some funding from private creditors, without it being deemed a default, “is very complicated”.

As a result of the discussion, he said, the euro group had “cleared the way for a solution”.

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Threats are only worth making if those making the threats could actually carry them out
If this eurozone brinkmanship nudges the Greek parliament to reject the further budget squeeze,
we'll be closer than is remotely prudent or sensible to a 1930s-style financial and economic disaster.

Robert Peston, BBC Business editor, 20 June 2011

Eurozone finance ministers' overnight decision to withhold payment of 12bn euros of emergency loans to Greece, pending agreement by the Greek parliament on austerity measures and privatisations, would be rational and credible on the basis that Greece has more to lose from a disorderly Greek default than the eurozone itself.

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WarGames: Chicken-Race mellan Berlin och Frankfurt
- “The central bank equivalent of nuclear deterrence: defy us and we will blow up the world”
Rolf Englund blog 10 juni 2011

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Luxembourg Prime Minister Jean-Claude Juncker, the head of the eurozone group of finance ministers said
Germany was "playing with fire" with a plan to involve private creditors in resolving the crisis.
His comments come as finance ministers prepare to meet in Luxembourg.
BBC 19 June 2011

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"lack of discipline in countries such as Greece and Portugal was matched only by the build-up of asset bubbles in others like Spain and Ireland"
The muddle-through approach to the eurozone crisis has failed to resolve the fundamental problems of economic and competitiveness divergence within the union.
If this continues the euro will move towards disorderly debt workouts,
and eventually a break-up of the monetary union itself, as some of the weaker members crash out.

Nouriel Roubini, Financial Times 13 June 2011

Paradoxically the halo effect of early interest rate convergence allowed a greater divergence in fiscal policies. A reckless lack of discipline in countries such as Greece and Portugal was matched only by the build-up of asset bubbles in others like Spain and Ireland.

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The bail-out strategy that rescued Europe’s peripheral economies is proving insufficient.
This threatens the whole project of European integration
The Economist print Jun 16th 2011

The debate about how to deal with Greece’s debt crisis has descended into a high-stakes stand-off between Germany,
which wants the maturities on Greek bonds to be extended, and the ECB, which resists any debt restructuring.

The hope is still that Europe’s leaders will come up with a face-saving compromise at their summit on June 23rd-24th.

But the longer the confrontation continues, the greater the risk of an accident: a chaotic Greek default and exit from the euro.

Inherently, there are two conflicting economic tensions in the rescue packages.

The first is that the austerity programmes needed to cut deficits are killing the growth needed to make debt bearable. If Greece had got into trouble outside the euro, the drachma would have fallen, creating an external offsetting boost to the economy by making exports cheaper and curbing imports.

The other inherent tension is that the steps needed to improve competitiveness within the euro require prices and wages to be held down, making it even harder to cope with debt.

Though the ministers will doubtless go on talking, it is increasingly hard to see a safe way out of this crisis.

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Andes Borg å ena och å den andra sidan om eurokrisen
Ekot 17 juni 2011

Svenska Dagbladet åter i EMU-debatten!
Strukturreformerna är bra oavsett om de på sikt klarar av att blåsa tillräckligt liv i landet
Rolf Englund blog 17 juni 2011


European finance ministers will hold an emergency meeting on Tuesday in an effort to narrow differences over a €172bn ($247bn) rescue package for Greece.
FT 13 June 2011

The bail-out deal is at risk of being derailed by a growing dispute between Berlin and the European Central Bank over the role of private bondholders.

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Eurokrisen är alltså över? Fel.
Skulderna måste skrivas ned. Det är bättre att göra det
medan det finns några privata investerare kvar att dela notan med

DN-ledare 11 juni 2011


IMF's statutes stipulate that the organization can only lend a country money if it is certain that the state will be able to meet its payment obligations for the next 12 months.
The new report has now made it clear that Greece is not in a position to guarantee that, meaning that the IMF cannot transfer any more money
"The next disbursement cannot take place before this underfinancing is resolved," the report concludes.

This in turn means that Europe will have to come up with a new rescue package. German Finance Minister Wolfgang Schäuble estimates that Greece will need €90 billion /drygt 800 miljarder kronor/ to cover its funding needs between 2012 and 2014
Der Spiegel, 9 June 2011

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Today the French government is working overtime to make sure that a Sarkozy loyalist, the leader of his economic team — Finance Minister Christine Lagarde — becomes the next managing director.
Why do France and other euro-zone countries now care so much about who runs the I.M.F.?
Simon Johnson, the former chief economist at the IMF, New York Times June 2, 2011


The global fallout of a eurozone collapse
Kenneth Rogoff, Financial Times 6 June 2011

The writer is professor of economics at Harvard University and co-author with Carmen Reinhart of This Time is Different

A s many commentators have rightly observed, the euro experiment is at a crossroads. Either the eurozone will deepen into a fiscal union, or the weak members will be forced to break off.

The 1980s and 1990s taught us /Kronkursförsvaret 1992/ that for countries with open capital markets, fixed exchange rates are a mirage that cannot be indefinitely sustained.

If the euro goes the way of the Argentine currency peg, the noughts and tens – the first decades of the 21st century – will be viewed as teaching the same lesson about more radical currency marriages.

Sovereignty and currency co-habitation do not mix.

The sovereign debt crises that Europe is experiencing today are a typical aftershock of a deep financial crisis.
Nevertheless, even if the euro system was not at the heart of the crisis, it needs to be able to withstand two standard deviation shocks.

Unfortunately, as currently construed, the euro is looking very much like a system that amplifies shocks rather than absorbs them.

European leaders’ plans to achieve effective devaluation through major wage adjustment seem far-fetched.

The real question is whether common currency is sustainable politically. My guess is that if the current slow patch in global growth does not quickly subside, we will not have to wait long for an answer.

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The European Cental Bank's bailout package is just a $1 trillion fig leaf covering the problem and
a better move would have been to arrange for Greece and Portugal to leave the European Union
, Kenneth Rogoff told CNBC Friday 14/5 2010


Om euron kollapsar
Marianne Björklund, DN, 4 juni 2011

Det krävs förändringar i EU:s fördrag och därmed också nya uppslitande folkomröstningar.
Lägg till det den politiska prestige som har lagts i europrojektet och som riskerar att förvandlas till politiska slitningar om det kollapsar.

En annan, kanske troligare, möjlighet är att Grekland lämnar det eurosamarbete man bluffade sig in i och att valutaunionen som fortsätter med sexton medlemmar. Det skulle förmodligen stärka den europeiska valutan, men också smärta den europeiska banksektorn då Grekland skulle skriva av sina lån.

Politikerna lär inte ge upp europrojektet än på ett tag. Nästa steg ser ut att bli att kraven på Grekland höjs ännu ett snäpp och att mer pengar lånas ut.

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What happens when Greece defaults. Here are a few things:
Andrew Lilico, Daily Telegraph, May 20th, 2011

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Co-Founder Of Reaganomics, Paul Craig Roberts:
"There Is Probably More Democracy In China Than There Is In The West"
not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty.
Youtube via Zerohedge 23 May 2011

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Paul Craig Roberts


After the creation of the euro in 1999, European nations that had previously been considered risky,
and therefore faced limits on the amount they could borrow, began experiencing huge inflows of capital.
After all, investors apparently thought, Greece/Portugal/Ireland/Spain were members of a European monetary union, so what could go wrong?
Paul Krugman, New York Times, 22 May 2011

The answer to that question is now, of course, painfully apparent. Greece’s government, finding itself able to borrow at rates only slightly higher than those facing Germany, took on far too much debt.

The governments of Ireland and Spain didn’t (Portugal is somewhere in between) — but their banks did, and when the bubble burst, taxpayers found themselves on the hook for bank debts.

The problem was made worse by the fact that the 1999-2007 boom left prices and costs in the debtor nations far out of line with those of their neighbors.

What to do? European leaders offered emergency loans to nations in crisis, but only in exchange for promises to impose savage austerity programs, mainly consisting of huge spending cuts.

Objections that these programs would be self-defeating — not only would they impose large direct pain, but they also would, by worsening the economic slump, reduce revenues — were waved away. Austerity would actually be expansionary, it was claimed, because it would improve confidence.

But the confidence fairy hasn’t shown up. Europe’s troubled debtor nations are, as we should have expected, suffering further economic decline thanks to those austerity programs, and confidence is plunging instead of rising. It’s now clear that Greece, Ireland and Portugal can’t and won’t repay their debts in full, although Spain might manage to tough it out.

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Greece, Ireland, Portugal, Spain

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“Events in Greece have brought the euro area to a crossroads:
the future character of European monetary union will be determined by the way in which this situation is handled.”
Jens Weidmann, Bundesbank president and European Central Bank governing council member, Hamburg, 20 May, 2011
Financial Times, Ralph Atkins, May 24 2011 22:35

Jean-Claude Trichet, ECB president – with less than six months before his eight-year term expires – has refused to discuss any debt restructuring for the nation, storming out of a meeting of eurozone finance ministers in Luxembourg this month when it was raised.

His colleagues, including Mr Weidmann of the Bundesbank, have raised the stakes. They warn that if politicians take even a modest step towards a restructuring, the ECB will cut Greek banks off from its lifesaving liquidity supply, triggering a financial collapse that would push the country’s economy into the abyss.

It is the central bank equivalent of nuclear deterrence: defy us and we will blow up the world

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Concluding remarks at the Banque de France / Deutsche Bundesbank Spring Conference on “Fiscal and Monetary Policy Challenges in the Short and Long Run”
Dr Jens Weidmann, President of the Deutsche Bundesbank, Hamburg 20 May 2011

Bundesbank President och Grekland – “the central bank equivalent of nuclear deterrence: defy us and we will blow up the world”
Rolf Englund blog 25 maj 2011

Kaos väntar om Grekland faller
Allt fler ifrågasätter om Grekland kan undvika en statsbankrutt.
Men om landet ger upp och ställer in betalningarna hotar svåra banksmällar över hela Europa och argentinskt kaos i Aten, spår bedömare.
Dagens Industri 24 maj 2011

Simon Johnson, tidigare chefsekonom vid IMF och numera forskare vid Bostonuniversitetet MIT, varnar för ett ”Lehman moment”, en global finansiell hjärtinfarkt i stil med oktober 2008, om det blir aktuellt med en nedsättning eller tidsomläggning av Greklands skuldbetalningar, rapporterar Bloomberg.

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The Spanish people have finally found their voice. For over a week they have been occupying squares across the country to protest at unemployment. For 16- to 24-year-olds, 43% are without work.
What unites the protesters is a desire for a change, a sense that the "establishment has failed an entire generation". Having taken to the streets they might not accept further austerity if it was needed.
So Spain is once again troubling markets and officials. A weak government is caught between needing to enforce spending cuts and protesters demanding work.
Gavin Hewitt, Europe editor, BBC, 23 May 2011

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The endgame for Europe is approaching — and much faster than anyone expected
Italy’s bond market turbulence means the EU faces an immediate decision:
political union or scrap the euro
Anatole Kaletsky, The Times, July 13 2011

This was designed to relieve the Greek Government’s debt burden, which the EU has belatedly accepted as unsupportable — and to ensure that private investors bear some of the consequent loss. So far, so good. What the EU politicians did not seem to realise was that a plan to wipe out half the value of Greek government bonds might be seen as a warning to bondholders of other indebted EU countries.

There is only one real alternative to a break-up of the euro. This is to reinforce the single currency with an EU fiscal policy, administered by an EU finance ministry and backed by rapid progress towards a federal political union.

The creation of so-called E-bonds, jointly guaranteed by all European governments, to replace half or more of existing national debts.

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The total cost to taxpayers in Germany and other creditor countries of supporting Greece, Ireland and Portugal will be much higher than seemed likely last year
because last year’s bailout funds were largely spent on repaying private lenders to these countries and their insolvent banks.
Anatole Kaletsky, The Times 11 May 2011

Last year it was possible for EU taxpayers to share the burden of the bailouts with private investors who had foolishly lent money to the Greek Government and the bust Irish banks. Now many of these investors have been repaid in full

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The confusing debate about “reprofiling” or soft restructuring pays testimony to the sheer incompetence of eurozone’s finance ministers,
who are now effectively talking Greece into a damaging, and most likely contagious default.

The FT reports that Jean-Claude Trichet walked out of a recent meeting chaired by Jean-Claude Juncker in protest.
FT Deutschland reports this morning that Trichet told finance ministers on Monday night that the ECB would respond to a reprofiling by refusing to buy any new Greek debt instruments (meaning it will not be part of any voluntary arrangement in respect of its own Greek debt portfolio).
Furthermore, the ECB would refuse to supply the Greek banking system with any further liquidity.
Eurointelligence 19 May 2011


The ECB, which has bought about €45bn /SEK 404 miljarder/ of Greek bonds over the past year,
believes that eurozone governments should provide further loans
if Greece requires additional help.
Financial Times 18 May 2011

The European Central Bank has criticised proposals for a possible restructuring of Greek sovereign debts, laying bare a behind-the-scenes row between ECB technocrats and European Union politicians over Greece’s debt crisis.

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Om Grekland ställer in betalningarna, alternativt skriver ned värdet på sina utestående lån,
kommer den största förlusten att drabba Europeiska centralbanken.
ECB, har blivit Greklands enskilt största fordringsägare.
Gunnar Örn, Dagens Industri Papper, 12 maj 2011

Interest rate cuts work their way through to the real economy by a number of transmission channels.
Cui bono? The banks, of course. The bank-bailout channel will be the only monetary transmission mechanism to function like clockwork.

So do not be fooled by anybody who says that the central bank should cut interest rates for the benefit of innocent citizens
Wolfgang Munchau, FT January 20 2008


The eurozone, as designed, has failed.
It was based on a set of principles that have proved unworkable at the first contact with a financial and fiscal crisis.
It has only two options: to go forwards towards a closer union or backwards towards at least partial dissolution.
This is what is at stake.

Martin Wolf, Financial Times, 31 May 2011

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Federalism

More by Martin Wolf


The underlying economics of the /Euro/crises are clear
During the boom years, a number of countries were able to borrow more and on more favourable terms than ever before. They, then, ran huge current account deficits.
The latter turned out to be the leading indicator of future crises, not fiscal deficits, as Germany’s mistaken conventional wisdom would have it.
Martin Wolf, Financial Times 18 May 2011

The domestic counterparts of these external deficits could be huge fiscal deficits (as in Greece), huge private financial deficits (as in Ireland and Spain) or a combination of the two (as in Portugal).

Indeed, we now know that the distinction between private deficits and debt and public deficits and debt is far less absolute than the fiscal priesthood understands: private debt becomes public debt and private deficits become public deficits very swiftly.

In a crisis, huge external deficits also result in “sudden stops” in the inflow of external finance and so the need for official support, to finance the ongoing fiscal and current account deficits and capital flight.

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The problem with the strategy of imposing the burden on taxpayers in borrowing countries is that it is unlikely to work.
As an ever greater proportion of the financing ends up with official sources, the latter are likely to end up bearing politically explosive costs when debts are written off.
Martin Wolf, Financial Times 18 May 2011

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The eurozone’s journey to defaults
Martin Wolf, Financial Times, May 10 2011

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More by Martin Wolf

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Läget i Grekland blir allt allvarligare. Ekonomin skenar och missnöjet bland människor växer.
Vilka politiska konsekvenser får den ekonomiska krisen i Grekland? Giorgios Logothetis är författare och journalist och före detta borgmästare på Lefkas, nu på besök i Sverige.
Vår korrespondent Vladislav Savic rapporterar från gatorna i Aten
Ekot 11/5 2011


“I was told to say there was no meeting... We had certain necessities to consider”
Guy Schuller, spokesman for Jean-Claude Juncker, admitted yesterday to lying about the secret meeting of finance ministers on Friday.
Wolfgang Münchau no longer believed any statement by any EU officials in respect of this crisis.
We are in the stage of the crisis where officials are lying all the time.
Eurointelligence 10/5 2011

Skrattar bäst som skrattar först om Grekland
Rolf Englund blog 10/5 2011


Europe is running a giant Ponzi scheme
The writer was governor of Argentina’s central bank and director of the Centre for Central Banking Studies at the Bank of England
Financial Times 5/5 2011
Vem kan vara mer kvalificerad?
Länk via Rolf Englund blog 2011-05-06


In May 1931, a Viennese bank named Credit-Anstalt failed.
it occurred in a small, peripheral country, just as today's worst problems are concentrated
so far in Greece, Ireland, and Portugal
Bloomberg Businessweek's Economics editor Peter Coy, April 20, 2011

The scariest thing about the Credit-Anstalt default is that it occurred in a small, peripheral country, just as today's worst problems are concentrated so far in Greece, Ireland, and Portugal, which combined make up just 5 percent of the 27-nation European Union's gross domestic product. "Austria is a tiny, tiny little place, and you wouldn't imagine it could set off a chain of domino reactions. But it did. I do see exactly that potential now," says James.

There's a modern analogy in Greek banks' unwise loans in Bulgaria, Romania, and Serbia.

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For all Germany’s fear of becoming locked into permanent support for the Irish and others,
the irony is that it is already providing involuntary ‘bailouts’ via the eurosystem that carry similar risks.
In the Irish case, this is both larger than the EFSF bailout , €146bn as against €67bn,
and much cheaper, 1% interest as against 5.8 %.
John Whittaker, Eurointelligence 7/4 2011

Pushing the Irish and Greeks into official EFSF-style bailouts thus worsens their finances and makes default more likely.

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Trichet/ECB

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After the Latin American debt crisis in the 1980s, US regulators lied about the health of American banks until they were in a position to take a voluntary haircut on their bad loans.
The Brady Plan holds important lessons for euro-zone governments looking for a way out of the current debt crisis.
Jacob Funk Kirkegaard, Der Spiegel 14/4 2011

Jean Monnet, the French economist and public official who is regarded as one of the architects of European unity, once famously stated that "Europe will be forged in crises and will be the sum of the solutions adopted for those crises."

Gone is the politically expedient "no bailout" clause of the euphoric early period of the monetary union.

Jean Monnet

THE BRADY PLAN

Full text at Der Spiegel

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Greek, Portuguese Bonds Slump as Schaeuble Proposes Restructure
Bloomberg, Apr 14, 2011

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RE: "Tsunamani sinks all the boats"
Eurozone banks need to address serious weaknesses in their funding, the report argued,
citing a $3,600bn “wall of maturing debt” coming due in the next two years across the globe,
with Irish and German banks facing the greatest difficulties in rolling over funding.
about IMF global financial stability report, FT 13/4 2011

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A rising tide lifts all boats


Many European banks need bigger capital cushions to restore market confidence and help reduce the risk of another financial crisis,
according to the IMF's Global Financial Stability Report

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A day after Portugal formally requested aid from the European Union to help ease ongoing debt problems,
Madrid on Friday insisted that it was "out of the question" that Spain would be next.
German commentators aren't so sure, and say that it's time for European leaders to reveal the true extent of the problems.
Der Spiegel 8/4 2011

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What the eurozone must do if it is to survive
The clear and present danger to the eurozone is Spain.
Wolfgang Münchau January 31 2010


Not a bang but a whimper: the threat facing the eurozone
Der Spiegel, the German news magazine, has caused a stir in Brussels by reprinting bits
Charlemagne blog, The Economist,Jan 25th 2010

Der Spiegel, the German news magazine, has caused a stir in Brussels by reprinting bits of an unusually gloomy internal report from the European Commission on the euro zone (the 16 countries that use the single currency). In particular, people have focussed on the report's finding that differing competitiveness among euro zone countries is "a cause of serious concern for the euro area as a whole." In a widely quoted extract, the report seen by Spiegel frets that:

...differences among euro zone countries "jeopardize confidence in the euro and threatens the cohesiveness of the euro area."

British Eurosceptics who have been predicting the collapse of the euro since before it was even created will no doubt be nodding sagely and feeling vindicated.

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Comment by Rolf Englund;
Not only British, I would say, haa, hm



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