Writing Worth Reading
Writing Worth Reading
What's going wrong with the euro? Can the problem be contained? If so, how? And what if it isn't? Read on to find out
"France gave birth to it, faltered, and left it on the doorstop of some distant, passive-aggressive German parents. They are willing to feed the thing, but not to pay the bill at Harvard"
“Capitalism without bankruptcy is like religion without hell"
Jean-Claude Juncker, on the euro crisis
"We all know what to do, but we don’t know how to get re-elected once we have done it"
The view from Germany: "Greece has been in intensive care for years, but the patient, instead of recovering, is just getting sicker and sicker." Elections were final straw, it's time to leave the euro. Here's how it could happen
Excellent on recent destruction of Greece. Papandreou begged Merkel to soften terms of bailout. Merkel refused, said pain was necessary: "We want to make sure nobody else will want this." There's European solidarity for you
What happens after an election result like that? And in circumstances like these? When to be in power is to commit political suicide. And even the traditional parties cannot cooperate. Mason sees two possible routes out
Interesting counterweight to arguments that Greece should default, leave euro, re-take control of own economy. In brief, reintroduced drachma could drop so much in value that benefits of default would evaporate
Europe slumps, unemployment soars, austerity is madness. What else to try? Francois Hollande says "growth". But how? Only plausible option is labour-market reform. In Spain it's easier to get a divorce than to sack a worker ($)
"The view that Germany is becoming a hegemonic power in Europe, ready to translate its economic power into actual European preeminence, is tempting." But it's also flawed. Germany lacks both the will and the ability (PDF)
Would a fund of such magnitude stabilise the eurozone crisis? Would the markets be "awed into submission"? This analysis argues not. More is required. Trouble is European leadership doesn't recognise reality of what's needed
"Germany faces a difficult choice: Either it accepts higher inflation and risks the electorate's confidence in the euro, or it paves the way for a wave of defaults culminating in either a transfer union or the collapse of the euro"
"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"
The markets have sent Germany a message. It's no longer a safe haven, and there is no painless solution to euro troubles. This is the beginning of the end for the currency zone. Here's why, and how it's likely to play out
Fine analysis (PDF) of euro woes, how to resolve current turmoil. The eurozone crisis is as much a tale of excess bank leverage and poor risk management in the core as of excess consumption and wasteful investment in the periphery
Would Greece be better off defaulting and taking back control of its economy? Argentina defaulted in 2001 and didn't seem to suffer much from the experience. Well, it's not so easy. Here's how the Greek situation is different
Germany's medicine for European debt troubles is recessionary deflation, which means concentrating pain in eurozone's periphery. It won't work, leads to "paradox of thrift". Roubini's guess? "The endgame for the eurozone has begun"
"If your choice is global calamity or the printing of money, which would you choose?" Presumably the latter, though it's no long-term solution. The alternative, a European sovereign debt crisis, would be disastrous. Even for Germany
"If the euro is to become a normal currency, Europe needs a normal central bank – one that does not merely target inflation like an automaton, but that also understands its responsibilities as a lender of last resort"
New documents confirm early history of euro project. Numerous shortcomings were apparent right from start. Politicians realised Italy was an economic basket case. But chose to ignore the facts. After all this was a political project
Germany's willingness to allow its inflation rate to outpace the rest of the eurozone is a mere scrap. Too little, too late. The hole is now so deep that reversing the inflation dynamic won't be enough
"Europe is now roughly where the United States was between the Articles of Confederation of 1781 and the Constitution we know today, which replaced them in 1789. What is desperately needed is an Alexander Hamilton"
![The Outcast – Stray Dogs and Paper Walls by SpaceShoe [Learning to live with the crisis]](http://farm6.staticflickr.com/5245/5372030437_160cb29dd0_s.jpg "The Outcast – Stray Dogs and Paper Walls by SpaceShoe [Learning to live with the crisis]")
"Reading the press, one gets the impression of a bunch of lazy Mediterranean scroungers, enjoying one of the highest standards of living in Europe while making the frugal Germans pick up the tab. This is nonsensical propaganda"
"It is conceivable, if unlikely, that the eurozone will find ways to manage its emergency. It is inconceivable that it will cure the illness, because members are in denial about its nature and because it is a chronic condition"
Outstanding essay on history of euro crisis, way forwards for single currency: "The eurozone is likely to continue with almost all its current members. The challenge now will be to change the economic behavior of those countries"
Fine report on origins of Europe's debt crisis. A collapse of the European Union is now a possibility. And one which "would cause a financial convulsion that would make the collapse of Lehman Brothers seem like a theme-park ride"
Insightful policy briefing (10 page PDF) examines future scenarios for European economy. Region should prepare for widespread restructuring of sovereign and bank debt; continuing policy of protecting creditors from default untenable
"To understand why Germans are struggling with the role they’re being asked to play in the 21st century, you need to understand that they are still very much attempting to atone for the 20th." Euro is about peace, not just politics
Would that we were like Belgium, the country of no government where growth has remained relatively robust. Instead we, the West, are on course for a decade of hard times and widely shared economic pain. Is there another way?
If so, a tenuous and tempestuous one. "It is imperative to prepare for the default and defection of Greece, Portugal and perhaps Ireland. The European banking system would have to be recapitalized and put under European supervision"
"If it continues any longer with the status quo of dithering instead of decisiveness, the eurozone will break up and its national economies will weaken. Only by moving forward towards full integration – now – can Europe save itself"
Fine technical analysis of outlook for eurozone. "Persistent reluctance to get ahead of the looming systemic ticking bomb at the heart of the euro project has reached the point where it is likely to doom the euro’s existence"
Three things have to happen to make euro a viable currency. Reform and recapitalise the banks; allow deficit countries to refinance debt on same terms as surplus countries; provide an exit mechanism. The first two look do-able...
Excellent read on the EU, eurozone crisis, and coming default(s). Focuses on Greece, of course, but also interesting on Germany and reasons for the divide between politicians and public opinion in both those countries
Report (14-page PDF) imagines scenarios for European and US debt restructuring. The longer politicians dither, the more inevitable drastic action becomes. "Balance sheet recessions are very different from normal recessions"
After a year and a half, Greece is about to restructure its debts. This is necessary and good but wouldn't it be better if we'd got to this point without the extended delay and denial? Eichengreen has a solution
Similarities between Spain's current economic malaise and that of Ireland in 2010 are striking. Which suggests a bailout for Spain is inevitable. Would it be successful? Perhaps, but sheer size of the Spanish economy makes it a risk
Hollande says path of austerity carved out by Merkel is unsustainable. He'll come under pressure from Berlin to back down. But chaos in Greece helps him. Tacit alliance with Athens could get Germany to budge
Compelling predictions for 2012. Shape of the crisis in Europe will be determined by how three major issues play out. Mason hazards some answers. Also predicts return of protectionism internationally, rise of conviction politicians
Evidence supporting Keynesian pro-stimulus approach is astonishingly thin, says Barro. Now France and Greece are likely to diverge from path of austerity, imperilling the euro. At least we'll get better data on what works
"Financial markets have no memory. They are driven by the opportunity tomorrow rather than by recrimination for yesterday." Default by Greece, then by Ireland, would let both countries, and the financial markets, make a fresh start
Exceptionally clear and helpful analysis of euro crisis and its systemic causes. While peripheral governments "may have done some things that contributed to the crisis, the odds were significantly stacked against them to begin with"
