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8th September Graham Bishop's Summer Special - Economic Crisis
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Articles from 21 July 2011 - 08 September 2011
Economic Crisis
WSJ: Italian austerity plan clears Senate hurdle
The Italian government's austerity package was approved by the Senate on Wednesday, clearing a major hurdle in Italy's efforts to convince investors that the country is credit-worthy.
FT: German court upholds eurozone rescue
Germany's constitutional court has rejected a series of challenges to the eurozone financial rescue packages agreed last year for Greece and other debt-strapped members of the European currency union.
Ruling of German Constitutional Court on euro rescue package
The Federal Constitutional Court has rejected as unfounded three constitutional complaints which are directed against German and European legal instruments and other measures in connection with the aid to Greece and with the euro rescue package.
FT: Dutch PM calls for Europe budget tsar
Mark Rutte and his government's finance minister, Jan Kees de Jager, said the new “commissioner for budgetary discipline” should be given the authority to impose a gradually more painful series of penalties on profligate eurozone countries, including the withholding of EU development funds.
President of the European Council Herman Van Rompuy welcomes today's judgement by the German Federal Constitutional Court
In a statement, President Van Rompuy said he welcomed the positive outcome of this morning's ruling by the Court of Justice of Karlsruhe, which confirms the validity of the support schemes agreed upon in the euro area for countries facing financing difficulties.
Commissioner Olli Rehn: Overcoming the economic crisis in Greece and Europe
In a speech given at the ALDE Seminar "Reset Greece", Rehn made reference to the currently rather high expectations on how eurobonds could help solve the debt crisis by pooling the debt issuance of euro area Member States.
President Herman Van Rompuy: "Beyond the crisis - lessons for the future of the eurozone"
In a speech delivered at the London School of Economics, van Rompuy commented that excessive debt is a problem that has hit a number of countries across the world. But its existence in some eurozone countries has had an impact right across the eurozone, and indeed the single market.
Statement of the European Commission on new fiscal measures announced by Italian Government
The Commission said it welcomes the new measures announced today by the Italian Government as they confirm the determination of the Italian authorities to meet the agreed targets of deficit and debt reduction, while helping tackle the deep rooted structural weaknesses of the Italian economy.
WSJ: Italian minister gives austerity assurance
Italy's industry minister, Paolo Romani, has dismissed calls for Italy to speed up its timetable for passing budget-tightening measures, rebutting criticism that the Italian government's austerity package isn't tough enough to dig the country out of the eurozone debt crisis.
FT: Italian debt markets break losing streak
Italian 10-year yields, which have an inverse relationship with prices, fell for the first time since August 19, with traders estimating that the ECB had bought about €3 billion in Italian and Spanish bonds on Tuesday. The Spanish bond markets also broke a seven-day losing streak.
FT: Italy makes last-minute budget U-turn
Silvio Berlusconi's government caved in to pressure from bond markets and European partners late on Tuesday by announcing a last-minute U-turn to strengthen Italy's proposed austerity package.
FT: We must listen to what bond markets tell us
Martin Wolf in his FT column argues in favour of fiscal spending, as fiscal deficits are helpful therefore in a balance-sheet contraction, not because they return the economy swiftly to health, but because they promote the painfully slow healing.
Reuters: Wall Street down on Europe; bear market fears grow
Wall Street fell for a third day on Tuesday on fears Europe has failed still to tackle its debt crisis, prompting worries the market is headed to new lows for the year.
NY Times: Europeans talk of sharp change in fiscal affairs
The idea is to create a central financial authority — with powers in areas such as taxation, bond issuance and budget approval — that could eventually turn the eurozone into something resembling a United States of Europe.
Statement by Herman Van Rompuy following his meeting with Jyrki Katainen, Prime Minister of Finland
The meeting focused on two issues: the follow up to the package of measures agreed by the Heads of State and Government of the Euro area on July 21; and the overall economic situation in the euro area.
FT: Fears rise again over Europe debt crisis
German benchmark borrowing costs fell below 2 per cent to all-time lows while Italy’s shot up as worries about the eurozone debt crisis and the fragility of banks once more intensified.
FT: Why austerity is only cure for the eurozone
Wolfgang Schäuble argues that excessive state spending has led to unsustainable levels of debt and deficits that now threaten our economic welfare. He writes that governments need not just to commit to fiscal consolidation and improved competitiveness – they need to start delivering on these now.
Reuters: Eurobond would get weakest member's rating
Moritz Krämer, head of Standard & Poor's European sovereign ratings, said that a joint bond issue by eurozone countries would get the weakest member's rating if the issue was jointly guaranteed.
WSJ: Spain is closer to controls on budget
Spain's lower house of Parliament on Friday approved a controversial amendment that will put budgetary controls in the constitution, in the country's latest effort to overhaul its battered finances and economy as regional governments continue to struggle to meet deficit goals.
FT: Trichet keeps pressure on Italy over budget targets
ECB President Jean-Claude Trichet pressed Italy to deliver on its promises to get its strained public finances in order, saying it was essential to restore fragile market confidence.
German ‘bad bank’ in Greek debt swap
FMS Wertmanagement is the first of Germany's two state-backed bad bank agencies to confirm it will take part in the Greek debt swap, after uncertainty about how far the institutions would support the bond rollover, which is aimed mainly at securing voluntary private sector participation.
Spiegel: Schäuble pushes for new EU Treaty
In response to the ongoing debt crisis, German Finance Minister, Wolfgang Schäuble, wants to expand the financial policy-making powers of the European Union, with the far-reaching reforms that would likely require a new EU treaty.
IMF completes third review under the extended arrangement with Ireland
The Executive Board of the IMF completed the third review of Ireland's performance under an economic programme supported by a three-year arrangement under the Extended Fund Facility. The completion of the review enables the immediate disbursement of €1.48 billion.
Statement by the European Commission, the ECB and the IMF on the Fifth Review Mission to Greece
A joint EC/ECB/IMF team has been discussing recent economic developments and reviewing policy implementation in the context of the fifth review of Greece's economic programme.
WSJ: Greece forecasts problems with budget-deficit goals
Greece is likely to miss its budget-deficit targets this year in the face of a deep economic contraction that is turning out to be even more severe than forecast. The country is likely to face demands for still more budget cuts.
FN: EFSF yields hint at investor worries
Yields on the bonds issued by the European Financial Stability Fund, which was set up to bail out struggling economies, have stayed high in August despite eurozone bond spreads narrowing, suggesting investors remain sceptical about the efforts of governments and regulators to steady the region.
Barroso's statement on priorities for the autumn
Following an extended meeting of the Commission, President Barroso addressed the challenging economic situation and the need to finalise measures rapidly on economic governance and public finances.
CII Thinkpiece 61: 'Back to Basics - Rethinking Risk Management and Regulation in a Post-Crisis World'
This Chartered Insurance Institute paper seeks to make sense of the crisis in terms of its implications for the management of risk. It reflects on the future for the practice of risk management, and provides some recommendations for financial institutions, and their regulators.
Eurozone special meeting: Time to pull together to defy the crisis
Two key messages emerged from the debate in ECON committee. Firstly, the ECB has remarkably stood up to fill the void left by Member States' inability at tackling the current crisis. Secondly, the economic governance 'six pack' remains the base on which to build long-term economic stability.
WSJ: German debate on bailout fund is test for Merkel
German Chancellor Angela Merkel faces growing resistance within her ruling coalition over expanding the powers of the eurozone's bailout fund, forcing a domestic political debate she will have to win to preserve confidence in her leadership.
ECON Committee: Debate with Commissioner Olli Rehn
Commissioner Rehn announced that the Commission is committed to presenting a report in the near future on the alternatives and technical issues for the design of eurobonds. On this basis, broad consultation will be required to identify possible common ground and a sensible way forward.
ECON Committee: Debate with Trichet on the latest developments in the eurozone debt crisis
Trichet stressed that while a special arrangement for Greece has been launched, the inflexible determination of all other euro area governments to honour their own individual sovereign signature fully is key in returning to stable market conditions.
Merkel to voters: Germany will emerge stronger
Chancellor Angela Merkel said that Germany will emerge stronger from the sovereign debt turmoil, as she sought to rally support for her crisis-fighting strategy ahead of elections in her home state in five days.
NY Times: Finland could upend fragile consensus on Greece
Finland is threatening to upend an agreement that eurozone countries made in July to expand the European Union bailout fund.
WSJ: Spain cements deficit-cap deal
Spain's main political parties reached a final deal on a key amendment that will include a budget-deficit cap in the country's constitution, in the latest sign that eurozone peripheral countries are pushing forward with reforms suggested by Germany.
FT: Cyprus approves emergency fiscal package
Greek Cypriot opposition parties teamed up to push emergency fiscal measures through parliament, amid fears that Cyprus could become the next eurozone member to seek a bail-out from its partners.
IMF Lagarde: Global risks are rising, but there is a path to recovery
Speaking at the Federal Reserve Bank of Kansas City's annual conference in Jackson Hole, IMF Managing Director Christine Lagarde argued the need for courage and bold action, and urged a comprehensive plan to support growth, reduce debt, and prevent further financial crises.
Presseurop: Helmut Kohl lectures Merkel
"Unfaithful partner, faulty policies". In an interview with German bimonthly, 'Internationale Politik', the former German Chancellor, Helmut Kohl, expresses some regrets at the lack of predictability in the policies (internal and external) of Angela Merkel.
European Central Bank swap line agreement
The Bank of England and European Central Bank announced an extension of their temporary reciprocal swap agreement (swap line) to Friday 28 September, 2012.
WSJ: Eurozone weighs new plan on Greek bail-out collateral
Eurozone governments are discussing a plan to have non-cash Greek government assets, including real estate, offered as collateral for a new round of rescue lending to Greece, backing away from a bilateral agreement reached last week between Greece and Finland, officials said Tuesday.
FT: German president says ECB bond-buying illegal
Germany's head of state has accused the European Central Bank of “legally questionable” action in buying up the bonds of countries worst-hit by the eurozone debt crisis.
Bloomberg: Sarkozy defends debt rating with pre-election tax on wealthy
French President, Nicolas Sarkozy, made a bid to defend France's top credit rating by raising taxes on companies and the wealthiest, as he aimed to limit the fallout of budget cuts and a slowing economy in an election year.
FN: Political mastery rules central bankers
The independence of central banks can now be seen as nothing more than a convenient fiction. If there were any residual doubt, witness the performance of the European Central Bank last week.
FT: Greco-Finnish deal reopens bail-out debate
Greece's new €109 billion bail-out came closer to unravelling on Monday amid a growing dispute over a side deal struck between Finland and Athens, with the Dutch government questioning the arrangement's legality and a leading credit rating agency warning it could undermine all eurozone bail-outs.
FT: A bigger, bolder fund can stop the next crash
Hendrikus Johannes Witteveen, IMF MD 1973-78, is of the opinion that unusual problems require unconventional solutions. The International Monetary Fund should establish a new "debt facility" to help indebted countries work out their finances.
FT: Merkel defies pressure on debt crisis
Angela Merkel on Sunday urged Europe to stand firm in the face of market pressure and the “dramatic crisis” gripping the eurozone, insisting the solution was for states to slash public debt and boost competitiveness.
FT: Rehn rejects option to lead Finland
Olli Rehn, the European Union's top economic official, has decided not to leave the post and run for president of Finland. He announced on Sunday he did not believe he should leave in the middle of the eurozone debt crisis.
Bloomberg: Van Rompuy opposes common bonds until euro region budgets converge further
European Union President, Herman van Rompuy, ruled out issuing common bonds as a cure for the debt crisis, saying any joint borrowing should wait until European economies and budgets are better aligned.
WSJ: France, Germany push for sanctions
France and Germany on Wednesday increased the pressure on their eurozone peers to improve fiscal discipline in the bloc with a proposal to cut off the region's wayward spenders from key European Union transfer funds.
WSJ: Fed eyes European banks
Federal and state regulators, signalling their growing worry that Europe's debt crisis could spill into the US banking system, are intensifying their scrutiny of the US arms of Europe's biggest banks, according to people familiar with the matter.
FT: France backs down on short selling loophole
French regulators have failed in an attempt to extend the short selling ban to major European stock market indices, in a climbdown that will allow investors to continue to bet on further falls in financial stocks.
FT: Greek rescue package faces further hurdles
Two of the eurozone's key creditor countries said on Thursday that their backing for Greek bail-out loans may be contingent on securing concrete collateral from Athens, a move that would create fresh hurdles to the new €109bn Greek rescue that may be difficult to surmount.
FN: Industry unites against 'dishonest' transaction tax
A raft of industry trade associations have rounded on EU policymakers, condemning proposals to move ahead with a highly controversial tax on financial transactions that they warned would hinder Europe's economic recovery, penalise retail investors, and damage businesses.
Joint Merkel and Sarkozy letter to Van Rompuy
France and Germany propose that all Member States of the euro area will transpose into national law a fiscal regime for a balanced budget by summer 2012, constitutionally anchored. They also propose a financial transaction tax.
Sharon Bowles MEP comments on the eurozone debt crisis
Sharon Bowles MEP, Chair of the European Parliament's Economic and Monetary Affairs Committee, comments on the eurozone debt crisis: "Too little, too uncertain, too late - that has been the response of EU leaders to the eurozone debt crisis".
FT: France and Germany plan joint taxation
France and Germany are to adopt a common corporate tax system by 2013, in an effort to signal greater co-ordination of economic policy after confidence in the euro was buffeted by the sovereign debt crisis.
WSJ: Eurobond debate rises in Germany, France - Controversial idea gains attention as crisis efforts fall short
Germany and France are being forced to reconsider an unpalatable idea as the eurozone's debt crisis spreads to its core economies: making the currency bloc as a whole responsible for its member nations' debts.
FT: Sharp fall in German economic growth
German economic growth slowed to a near standstill in the second quarter of this year, dealing a further, unexpected blow to eurozone prospects.
FT: Europe need not wait for Germany
In this FT Opinion, Martin Sandbu writes that the lesson to draw from Washington's debt ceiling debate and the downgrade of its sovereign credit rating by Standard & Poor's - neither of which drove up US bond yields - is that size matters.
Statement by President Barroso and Commissioner Rehn on today's proposals by President Sarkozy and Chancellor Merkel
After a working meeting in Brussels, European Commission President, José Manuel Barroso, and Commissioner for economic and monetary affairs, Olli Rehn, issued the following statement.
IMF Christine Lagarde: Don’t let fiscal brakes stall global recovery
IMF Managing Director, Christine Lagarde, adds her views to the current market turmoil. Confidence has been shaken across the global economy and prompted many to conclude that all policy options have been exhausted. That impression is wrong – and could lead to paralysis.
WSJ: Italy cuts criticised by unions
After Italy unveiled a long-awaited austerity plan aimed at balancing its budget by 2013, criticism of the government over some parts of the decree has increased among unions, economists and business groups, paving the way for a possible general strike.
FT: Germany and France rule out eurobonds
Germany and France are ruling out common eurozone bonds to solve the bloc's current debt crisis, in spite of renewed pressure ahead of a meeting of chancellor Angela Merkel and president Nicholas Sarkozy on Tuesday.
FT: Three steps to resolving the eurozone crisis
In this FT analysis, George Souros says that a comprehensive solution to the euro crisis must have three major components: reform and recapitalisation of the banking system; a eurobond regime; and an exit mechanism.
Italy, UK press case for deeper eurozone fiscal ties
Britain's finance minister called for some form of fiscal union to resolve the eurozone's debt crisis on Saturday, while his Italian counterpart renewed a call for the introduction of common eurozone bonds.
WSJ: Italy unveils measures to balance budget
Italian Prime Minister Silvio Berlusconi's government unveiled measures Friday to balance Italy's budget by 2013, a year earlier than planned, by slashing €45 billion in public spending in a bid to pull Italy back from the brink of the eurozone crisis.
President Van Rompuy welcomes the rigorous financial measures adopted by the Italian Prime Minister and his Government
EC President, Herman van Rompuy, made the following statement following a telephone call he had today with the Prime Minister of Italy, Silvio Berlusconi.
WSJ: Global crisis of confidence
The debt crises in Europe and the US collided violently this past week, raising questions about whether political leaders are capable of stemming the trans-Atlantic panic.
Statement by the European Commission, the ECB and the IMF on the first review mission to Portugal
Staff teams from the European Commission, European Central Bank (ECB), and International Monetary Fund (IMF) visited Lisbon from 1 to 12 August for the first regular quarterly review of the Portuguese government's economic programme.
FT: Central banks - Two against the world
This FT analysis comments that the action this week leaves behind many questions as to whether central banks have done enough, what more they can do, and whether they can survive the powerful internal and external pressures which momentous decisions unleash.
FT: European quartet bans short selling
France, Italy, Spain and Belgium have banned all short selling of financial stocks for 15 days in response to sharp share price falls this week, but they failed to convince other regulators to go along with a European Union-wide prohibition.
Bloomberg: EU heads for eurobond clash over fiscal union
Thomas Mayer, chief economist at Deutsche Bank AG, and Stephen King, chief economist at HSBC Holdings Plc, talk about the global economy and the eurozone debt crisis, as well as the question of “eurobonds” or “fiscal union” -- toxic language in northern countries such as Germany.
FT: Focus of eurozone crisis turns to France
President Sarkozy summoned his key ministers back from holiday for an emergency meeting as concern mounted over prospects for growth and the country's ability to meet its debt targets.
WSJ: ECB puts pressure on Italy
Italy is under increasing pressure from the European Central Bank to pass growth-boosting measures, a press aimed at preventing the eurozone's third-largest economy from ushering in a dire phase of the continent's debt crisis.
ECB Trichet: Italian, Spanish bond purchases not a shift in ECB strategy
ECB President Trichet said today that the purchases of Italian and Spanish government bonds do not represent a shift in strategy for the European Central Bank, but are aimed at helping the transmission of monetary policy.
FT: Merkel faces revolt over eurozone deal
Battle lines are being rapidly drawn up in the German Bundestag for what promises to be a bruising debate over the crisis measures to stabilise debt markets in the eurozone.
Guardian: Financial crisis - full force of US downgrade is felt around the world
The Guardian comments that recent events have changed the US as an unassailable economic superpower. The US decline leaves China tipped as the next economic superpower, while pressure on US bonds is set to affect the eurozone crisis.
WSJ: ECB moves to prop up Italy, Spain
The European Central Bank signaled it would purchase government bonds of Italy and Spain on a large scale, in the most dramatic and controversial escalation of its nearly two-year effort to stem Europe's unfolding debt crisis.
Statement of G7 Finance Ministers and Central Bank Governors
Finance ministers and central bankers from the Group of Seven industrial nations today released the following statement affirming their 'commitment to take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence'.
Van Rompuy welcomes the decisions taken to strengthen fiscal discipline and growth
European Council President, Herman van Rompuy, welcomed the decisions made over the weekend and said they will contribute to financial stability in the euro area.
FT: Italy and Spain respond to ECB treatment – relief for Rome and Madrid but for how long?
Jean-Claude Trichet fired the European Central Bank's bazooka on Monday and the bond of markets of Italy and Spain rallied impressively. The question is whether the bank's intervention will be large enough, and sufficiently sustained, to prevent a further escalation of the eurozone debt crisis.
WSJ: Sarkozy and Merkel stress commitment to bailout moves
President Sarkozy and Chancellor Merkel moved to reassure jittery investors, reaffirming their commitment to measures recently agreed by European leaders to quell the eurozone debt crisis, as financial markets continued to bet that the region's debt woes could ensnare some of its largest economies.
Statement by the President of the ECB
ECB President, Jean-Claude Trichet, issued the following statement welcoming the announcements made by the governments of Italy and Spain concerning new measures and reforms in the areas of fiscal and structural policies, and saying the Securities Markets Programme will be actively implemented.
Commissioner Rehn: Ongoing developments in the eurozone
Rehn explained how the various measures agreed to are being implemented, and how market concerns about the management of the sovereign debt crisis are being addressed. He said that as the current turmoil has a global dimension and global repercussions, the solution itself must be global as well.
S&P: US long-term rating lowered to 'AA+'
Due to 'political risks and rising debt burden', Standard and Poor's have lowered their long-term sovereign credit rating on the US to AA+ from AAA and affirmed the A-1+ short-term rating - with outlook on the long-term rating negative.
ECB announces details of refinancing operations
The European Central Bank today announced that it would conduct a special six-month liquidity programme to help relieve tensions in eurozone financial markets.
Statement by President Barroso on the euro area sovereign bond markets
In a press release today, president Barroso said that developments in the sovereign bond markets of Italy and Spain were a cause of "deep concern".
President Barroso: Letter to members of European Council
In his letter, Barroso called for the EFSF enhancements agreed on July 21 to be made operational 'very soon', while avoiding the introduction of excessive constraints in terms of either additional conditionality or collateralisation of EFSF lending.
Herman van Rompuy: A summer of discontent?
In this Opinion Piece, European Council President, Herman van Rompuy, writes that to reduce debt, waste must be addressed and growth unshackled. Greece has a unique problem in the EU, but it is solvable.
European Commission: Increasing co-financing rates for EU funds - boosting European economic recovery
Today the European Commission agreed to measures that should make a significant contribution to getting some of the EU's most troubled economies back on track.
FT: Lagarde warns Europe to speak with one voice
European authorities should stop public bickering and speak with one voice to make the second rescue package for Greece work, warned IMF Managing Director, Christine Lagarde. But Ms Lagarde also defended the eurozone's handling of the Greek crisis.
IMF: Spain to keep up reform momentum
The IMF Survey finds that Spain's economy has stabilised this past year, with a modest recovery amounting to 1.6 per cent of GDP projected to take hold in 2012. But as recent developments in the sovereign debt markets have made clear, Spain is not out of the danger zone yet.
WSJ: Warnings feed Europe debt fears
Sober warnings that the European debt crisis didn't end with last week's summit of European Union leaders reignited concerns of contagion risks, boosting borrowing costs for high-debt governments and pressuring the euro.
Bloomberg: The euro crisis - big rescue, big doubts
This time is different. Really. That was the message from EU leaders after the debt-crisis summit produced an additional €109 billion in loans for deficit-bloated Greece, easier aid terms for Ireland and Portugal, and a retooled bailout fund to prevent markets from trashing Spain and Italy as well.
FT: Moody’s downgrades Cyprus bonds
Moody's has downgraded Cyprus' government debt two notches, bringing it closer to junk levels, in the latest sign the island nation may become the fourth eurozone country heading towards a multibillion-euro bail-out.
IMF's comments on France: Good progress but credibility needs to be cemented
Supportive policies and reforms contributed to a gradual recovery from the global economic crisis, but France's economic prospects are clouded by a challenging external environment, especially by possible spillovers from the euro area crisis.
Jean-Claude Trichet: The euro is not in question - it is solid, strong and credible
During an interview with “Le Point”, Trichet said that the ECB is not imposing “austerity” on Greece. He stressed that Greece itself is correcting its years of mismanagement. Sound governance is the only way to achieve growth and job creation based on a new-found competitiveness.
FT: Major banks hesitate to commit to Greek package
Apparently, several European banks with large exposures to Greek sovereign debt have yet to sign up to a plan for private-sector bondholders to contribute €37bn to a second Greek rescue package.
Sharon Bowles: Fire fighting summit goes in right direction but long-term eurozone health needs more
In her reaction statement following Thursday's meeting of Heads of State or Government of the eurozone, MEP Sharon Bowles, Chair of the EP economics and monetary committee, says real change is needed to consolidate the eurozone and not only fight the fires.
ECB published report on review of the international role of the euro
The report finds that the international role of the euro remained broadly stable during 2010 when compared with other major international currencies. The share of euro-denominated instruments fluctuated only marginally between 2009 and 2010 in the market segments examined.
IMF welcomed agreement to tackle eurozone crisis
IMF Christine Lagarde welcomed the agreement by the leaders of the euro area on a comprehensive package of measures to help Greece overcome its sovereign debt crisis and improve the tools available to fight future crises.
Greece Financing Offer: Statement by the IIF board of directors
The Institute of International Finance Board announced today its Financing Offer for Greece. The programme offers a menu of new instruments to investors in order to mobilise voluntary participation of investors with a target participation rate of 90 per cent.
President Barroso’s statement on the euro area summit: "We needed a credible package: we have a credible package"
The credible package "deals with both the concerns of the markets and of citizens. It responds also to the concerns of all Member States of the euro area. It is a package that every government has signed up to. For the first time in the crisis, the politics and the markets are coming together".
Eurozone summit statement by the Heads of State or Government of the euro area and EU institutions
Commitment to the euro was reaffirmed and 16 measures were agreed on covering the following areas: Greece, private sector involvement, stabilisation tools, fiscal consolidation and growth in the euro area, economic governance.
Graham Bishop’s Articles
Graham Bishop: Merkel/Sarkozy letter - historic steps for the eurozone… but could they spell the death knell of Britain in the EU?
Though dismissed by most of the English-language media, this letter contains ideas that could well have profound and historic implications.
Graham Bishop: The eurozone - looking back from 2020
Graham's view on current events as seen from the year 2020, reporting on the 'positive' scenario.
Graham Bishop: Why is no-one satisfied with the results of the July Crisis Council?
Deeply defective presentation contributed! But it becomes ever more apparent that the Heads of Government simply do not understand the natural, logical consequences of their actions.
Graham Bishop's blog: 7AM thoughts on the eurozone agreement - leaders have gone a long way but full details awaited
Technical details will be revealed in a session at 13.00 by the Commission. A more detailed judgement can be made after that. (18.00 comment: looks as though real details will only come in the next few months!)
Think Tanks
Bruegel: The euro's last-chance saloon
Zsolt Darvas comments that should Italy go flop, the most palatable solution would be a limited eurobond up to 60 per cent of GDP. This should be phased in through complete pooling of new issuances, in which a Member State can participate till its share in the stock of eurobonds reaches 60 per cent of its GDP.
Bruegel: Europe - small steps and giant leaps
Pisani-Ferry comments: "We were expecting eurobonds and we got economic governance. According to Merkel and Sarkozy the great leap forward would perhaps be the culmination, but for the moment small steps are the order of the day. The question is obviously whether small steps serve any purpose."
Bruegel: “It's the politics, stupid!”
Jean Pisani-Ferry comments that four years after first cracks in the financial system emerged, the coincidence of the euro area and the US debt crises is a powerful reminder of the complexity of the chain of events set in motion by the global financial crisis.
Bruegel: Global currencies for tomorrow: a European perspective
This report examines how the international monetary system (IMS) might evolve and the implications of different scenarios for the euro area over the next fifteen years.
Bruegel: A European fund for economic revival in crisis countries
Bruegel Resident Fellow, Benedicta Marzinotto, comments that significant volumes of Structural and Cohesion Funds have been pre-allocated but remain undisbursed or uncommitted.
Bruegel: Europe must intervene to get Greece growing
European leaders have called for a comprehensive strategy for growth in Greece and a task force will be appointed to set out the details of how European Union structural funds could be used to that end. Bruegel had floated such ideas in February and it now presents what should be done. 0
Bruegel: Europe - the last taboo
Jean Pisani-Ferry writes: You can always trust the Americans, Churchill said, because in the end they will do the right thing, after they have exhausted all the other possibilities. For the last 18 months, Europe has made of this famous phrase its roadmap: it has taken the necessary decisions, but always as a last resort.
CER: Was the euro summit a 'game changer'?
Senior research fellow, Philip Whyte, writes that with each successive summit the stakes become progressively higher, and the fear is raised that eurozone leaders are unwilling, or perhaps unable, to do what it takes to save the single currency.
CER: Europe's date with destiny
Senior CER research fellow, Hugo Brady, writes that it is the fate of the euro – arguably the most significant achievement of European integration – that will demonstrate whether the description of the EU as "yesterday's vision of the future" is true.
CER: Eurobonds or bust
CER Chief Economist, Simon Tilford, comments that the eurozone's institutional weaknesses have been laid bare. The attempt to run a common monetary policy without a common treasury has failed. Investors do not know what they are buying when they purchase an Italian bond – is it backstopped by Germany or not?
CER: Eurozone crisis - can contagion to Italy be arrested?
Philip Whyte writes that ever since the bail out of Greece last year, the eurozone has fought a desperate rear-guard battle to stem contagion to other countries – with little success. Ireland and Portugal have since been bailed out, and Cyprus could be next. Unless this contagion is arrested, the eurozone could face a potentially terminal crisis.
CER: Why the eurozone needs debt mutualisation
Simon Tilford writes that debt mutualisation alone will not save the euro, but without it the eurozone is unlikely to survive intact.
CEPS: Partial sovereign bond insurance by the eurozone
'Blue'- or euro-bonds guaranteed via joint and several liability by the eurozone Member States have been proposed as an important tool to stabilise and structure the eurozone sovereign bond markets. But in this new Policy Brief, Hans-Joachim Dübel argues the case for a partial insurance of sovereign bonds by the European Stability Mechanism.
CEPS: The eurozone debt crisis - from its origins to a way forward
As the eurozone debt crisis reaches a turning point, this Policy Brief by Research Fellow, Diego Valiante, argues for a more organised intervention by the ECB to stop contagion through the creation of a quantitative easing programme, coupled with a political agreement among Member States on a more federalist budget for the eurozone.
CEPS: What to do when the euro crisis reaches the core
In this new CEPS Commentary, CEPS Director Daniel Gros and Chief Economist of Deutsche Bank London, Thomas Mayer argue that the EFSF cannot work as intended but if it were registered as a bank the generalised breakdown of confidence could be stopped while leaving the management of public debt under the supervision of the finance ministers.
CEPS Commentary: From pain to gain on the EU frontier
Centre for European Policy Studies Director, Daniel Gros, argues that governments in the eurozone's periphery, including Spain and Italy, now face a dilemma: they must undertake structural reforms, but at the cost of even greater short-term pain.
CEPS: Only a more active ECB can solve the euro crisis
This paper by Paul De Grauwe asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders.
CEPS/EPIN: Euroscepticism finds fertile ground in the Dutch Parliament
Once regarded as a cornerstone of the European project, the Netherlands now figures as one of its severest critics. This commentary by Adriaan Schout argues that one reason for this reversal in position is that the Dutch Parliament has been skirting European problems.
CEPS: The EFSF as a European Monetary Fund - Does it have enough resources?
Daniel Gros and Alessandro Giovannini ask whether the EFSF has enough resources to become a credible deterrent against a recurrence of the recent turbulences in the euro area sovereign debt markets.
ELEC: The Ifo’s big blunder
ELEC Monetary Commission President, Wim Boonstra, looks at the miscalculations in the estimations by the German Institution for Information and Research (Ifo) last week as to how much eurobonds would cost Germany.
ELEC: Can eurobonds solve EMU’s problems?
In this paper, Wim Boonstra comments that EMU's real problem is that small Member States with serious financial problems, for example Greece, can infect the whole eurozone, in the process endangering the euro's bare existence. This points to a design flaw in the euro, which should be repaired.
Federal Trust: Federal union now
The European Union is in deep trouble. Europe's leaders and the EU institutions have shown themselves to be inadequate to the task. In this hard-hitting pamphlet, Andrew Duff argues that only a decisive move to a federal economic government of a fiscal union, backed up by an appropriate budget, will save the euro and help economic recovery.
The European Money and Finance Forum published July newsletter
On 11-12 May, approximately 130 participants gathered to discuss many key issues such as the debt crisis and the financial services supervisory architecture. Commission official, Martin Merlin, noted that in Europe there was not adequate macro-prudential supervision before the crisis.
Commentaries
Bruegel: G20 back into action
Ignazio Angeloni writes that the reality is knocking at the G20's door: the European debt crisis has taken a turn that threatens the global economy. He argues that the plans for the next meeting of heads of state or government, convened for November 3 and 4 at Cannes, need rethinking.
Wolfgang Münchau: The worst of the euro crisis is yet to come
Münchau comments that there is as yet little recognition in the eurozone's cacophonous capitals that an economic downturn poses an existential threat. He would therefore expect that the downturn will hit the eurozone with full force, and without defence. When that happens, the eurozone crisis will turn ugly.
Wolfgang Münchau: Even a joint bond might not save the euro
The universal experience of financial crisis management is that the longer one waits to resolve it, the more expensive the ultimate bill will be. In the eurozone that moment has been reached.
Wolfgang Münchau: The eurozone crisis is on pause, not over
In his FT column, Münchau writes that any agreement would have needed to pass three tests: whether it would lead towards debt sustainability in Greece; whether it would reduce the danger of contagion; and whether the participation of private investors is realistic and fair.
OMFIF: Collective leadership for ECB
David Marsh comments that during the past two years of euro-crisis escalation, the European Central Bank generally has won high marks for competence. Yet the picture has darkened since early summer. So it's time for the ECB to appear in public with collective leadership and a more cohesive voice.
OMFIF: As the Germans prepare for unpalatable decisions, the EMU virus is closing in on Berlin
David Marsh comments that since there is no firm buyer of last resort to repel bond market contagion, the viral assailants are now closing in on Berlin.
OMFIF: Sending in the water cannon - ECB calls in the riot squad
David Marsh writes that when trust, credibility and consent break down, anything can happen. But which will come first - water cannon or eurobond?
OMFIF: Picking a fight with the Bundesbank can be dangerous for ECB health
David Marsh writes that last night's statement from the European Central Bank about activating its 'securities market programme' – which was somewhat half-hearted about any commitment to purchasing Italian and Spanish bonds – is unlikely to dispel doubts about ECB unity.
OMFIF: Future of the euro - after the second Greek bail-out
In part 1 of OMFIF's Euro Briefing Note, subtitled "A state of division - how EMU has become Europe's melancholy union", David Marsh writes that the European single currency has hauled itself back from the brink, but the abyss still looms.
OMFIF: Learning from the past in monetary union saga
In part 2 of OMFIF's Euro Briefing Note, David Marsh includes 'history lessons' on the method behind German Chancellor Merkel as she takes her lead from former Chancellor Kohl, and Jacques de Larosière's statement from 1975: "Deficits do matter".
John Nugée: Wider political lessons from the European sovereign debt crisis
The European sovereign debt crisis has become the dominant issue not just in European markets, but in global finance. The world is watching in fascination and with considerable concern as European governments struggle to bring stability back to their national finances, and the EU works to stave off sovereign defaults. Much hangs on their efforts, including possibly the fate of the euro itself.
Nicolas Véron: An accounting perspective on financial globalisation
Bruegel Senior Fellow, Nicolas Véron, comments that sometimes it takes a narrow lens to distinguish the true features of big objects. The future of financial globalisation, whatever one's perspective on its dangers or merits, is one of the biggest questions of our times.
Paul N Goldschmidt: The Franco-German summit - Vague communiqué, worrying explanations!
Chancellor Merkel had warned that high expectations were not warranted: she has kept her word!
Paul N Goldschmidt: But who are these speculators?
The temporary ban on short selling of a limited number of financial stocks in four eurozone countries has, once again, drawn attention on “speculators”. This decision was taken after the precipitous drop in stock markets in which financials were particularly badly bruised.
Paul N Goldschmidt: The financial crisis - the ball is now clearly in the Governments' court
The fleeting positive "opening" of European stock markets and the significant reduction in borrowing spreads in the sovereign debt market should come as no surprise after the intense behind the scene activity of the weekend, prompted by the downgrade of the US sovereign rating, which galvanised authorities into action.
Paul N Goldschmidt: The sovereign debt crisis - an attempt to decipher the message conveyed by markets in disarray
Goldschmidt writes that without rapid and determined action, markets are liable to create an irretrievable situation in which an uncontrolled implosion of EMU would lead most likely to the end of the European Union itself.
Paul N Goldschmidt: The eurozone summit - “financial peace in our time?”
Like many commentators, I cannot but commend the achievements of last week's eurozone summit which, no doubt, constitutes an important milestone on the path to restoring financial stability. There are still many questions to be answered with regard to the implementation of the agreements and markets will soon test the resolve of the authorities to “do whatever it takes” to ensure the long term stability of the euro.
Douglas J Elliott: Why can’t Europe get it right the first time… or the second… or the third?
Giving a perspective from the US, Brookings Institution Fellow, Douglas J Elliott, writes that the euro crisis has struck again, hammering not just European markets, but doing real damage to US markets and to economic prospects around the world.
Klaus C Engelen: 'Angela’s Amateur Hour'
After nearly wrecking monetary union through inaction, bumbling German Chancellor Merkel may have saved the eurozone despite herself.
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