The Euro
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How to save the euro
The new leaders in France and Greece should reassure the markets that they're willing to work within the existing framework of agreements and that they're committed to the euro. By Cyrus Sanati FORTUNE -- The elections in France and Greece over the weekend have created a crisis of confidence that could eventually drown the euro and push the continent into a deeper recession. Talk of tearing up past agreements and a return to profligate spending is not what Wall Street and the markets need to hear right now and will simply serve to encourage further capital flight out of the eurozone. All this uncertainty confirms that a more concrete solution to the euro crisis is needed, one that involves a much tighter economic union -- something that regrettably looks increasingly untenable."Is Europe on a Cross of Gold?" by Barry Eichengreen
Exit from comment view mode. Click to hide this space Comments View/Create comment on this paragraph ROME – Increasingly, one hears predictions that the euro will go the way of the gold standard in the 1930’s.
The Value of European Currencies if the Euro Breaks Up, RealClearWorld - The Compass Blog
From a paper authored by Jens Nordvig and Nick Firoozye, an estimate of how European currencies would be valued following a break-up of the Eurozone. Via Business Insider . (Click on the image for a larger picture.)A Tale of Two Currencies by Stefano Casertano | Project Syndicate
Exit from comment view mode. Click to hide this space Comments View/Create comment on this paragraph The Euro crisis resembles a Shakespearean tragedy: Despite the obvious deficiencies of the monetary union, all alternatives are decidedly worse for Germany. Comments View/Create comment on this paragraph The German idea of an exit from the Euro is gaining popular support. According to an “Emnid-Institut” poll, 56% of Germans would favor a return to the “Deutsche Mark,” the country’s old currency.
Tell me how your next book, David Marsh’s The Euro: The Politics of the New Global Currency, helps us in terms of understanding the euro. Marsh’s approach, like Judt’s, is historical. Marsh argues that one can’t understand how the euro came about in 1999 – and I think he would argue, similarly, that one can’t anticipate what will happen next – without recalling Europe’s efforts over the course of the sixties, seventies and eighties to restore and maintain monetary stability. We have to understand the response to recent developments in that context.
Barry Eichengreen on the Euro
Europe is Not the United States - Martin Feldstein - Project Syndicate
Exit from comment view mode. Click to hide this space Comments View/Create comment on this paragraph CAMBRIDGE – Europe is now struggling with the inevitable adverse consequences of imposing a single currency on a very heterogeneous collection of countries. But the budget crisis in Greece and the risk of insolvency in Italy and Spain are just part of the problem caused by the single currency. The fragility of the major European banks, high unemployment rates, and the large intra-European trade imbalance (Germany’s $200 billion current-account surplus versus the combined $300 billion current-account deficit in the rest of the eurozone) also reflect the use of the euro. Comments View/Create comment on this paragraph European politicians who insisted on introducing the euro in 1999 ignored the warnings of economists who predicted that a single currency for all of Europe would create serious problems.
The Eurozone’s Fork in the Road - Mario I. Blejer and Eduardo Levy Yeyati - Project Syndicate
Exit from comment view mode. Click to hide this space BUENOS AIRES – Many observers have recently declared that the eurozone debt crisis is practically resolved, or at least on hold for a few years. The falling yields at the Italian government’s last bond auctions in 2011 suggested a significant reduction in the perceived sovereign-default risk. Since Italian bonds are regarded as the bellwether of the crisis, many interpret this is a sign that the European debt market is normalizing. The “solution” to the crisis was putatively facilitated by the European Central Bank’s decision to lend unlimited funds to commercial banks for three-year terms at very low rates.Understanding developments in the European crisis has become rather like Kremlinology, trying to figure out the meaning of subtle changes in wording and rearrangements of the Politburo on the podium for May Day parades. One example is Mario Draghi of the European Central Bank (ECB). Sometimes the bank president suggests that he will do what nearly everyone else can see is necessary for the survival of the euro: print lots of them and use some to buy EU government debt, following the example of the Fed and the Bank of England.
Commentary: The Erosion of the EU | The National Interest
The euro crisis is a direct consequence of the crash of 2008. When Lehman Brothers failed, the entire financial system started to collapse and had to be put on artificial life support. This took the form of substituting the sovereign credit of governments for the bank and other credit that had collapsed. At a memorable meeting of European finance ministers in November 2008, they guaranteed that no other financial institutions that are important to the workings of the financial system would be allowed to fail, and their example was followed by the United States. Angela Merkel then declared that the guarantee should be exercised by each European state individually, not by the European Union or the eurozone acting as a whole. This sowed the seeds of the euro crisis because it revealed and activated a hidden weakness in the construction of the euro: the lack of a common treasury.
Does the Euro Have a Future? by George Soros | The New York Review of Books
SO GRAVE, so menacing, so unstoppable has the euro crisis become that even rescue talk only fuels ever-rising panic. Investors have sniffed out that Europe’s leaders seem unwilling ever to do enough. Yet unless 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.
Europe's currency crisis: How to save the euro | The Economist
The Ticking Euro Bomb: What Options Are Left for the Common Currency? - SPIEGEL ONLINE - News - International
Politicians have maneuvered their countries into an unparalleled situation in the euro crisis. And they already know what most voters don't yet suspect. In the end, only two possibilities will remain to save the beleaguered common currency: an expensive transfer union or a smaller monetary union. Either solution will be extremely costly.The Challenge for Mario Draghi at the European Central Bank | Foreign Affairs
The anxiety surrounding the G-20 meeting in Cannes this week only deepened when Greek Prime Minister George Papandreou called for a popular referendum on the debt agreement reached between his country and its foreign lenders, placing the deal in jeopardy. Although Papandreou soon called off the vote, fears of a Greek default highlighted a critical transition at the top of Europe’s banking system. The accession of Mario Draghi, the former governor of the Bank of Italy, to the presidency of the European Central Bank will help decide how the Europeans will address the fundamental problems at the root of the current debt predicament. Draghi is replacing Jean-Claude Trichet, who is stepping down after eight years on the job. Trichet made the ECB a respected and powerful institution. Only the U.S.Central Bank Loans May Ease Europe’s Crisis - NYTimes.com
Yves Herman/Reuters Mario Draghi, the central bank's president, second from left, had resisted calls to stand directly behind debtor governments by buying their bonds as necessary, without limit. Though it is too soon to gauge any longer-term benefits, the move, by the , could be a turning point in the Continent’s — a cascading problem that for nearly two years has plagued financial markets around the world and now threatens global economic growth. American officials and global economists have long urged the Europe’s central bank to take just such an aggressive stance — even as European political leaders have repeatedly failed to devise concrete near-term plans to address Europe’s debt problems and deteriorating finances. Carl B.Exit from comment view mode. Click to hide this space CAMBRIDGE – As if the economic ramifications of a full-blown Greek default were not terrifying enough, the political consequences could be far worse. A chaotic eurozone breakup would cause irreparable damage to the European integration project, the central pillar of Europe’s political stability since World War II. It would destabilize not only the highly-indebted European periphery, but also core countries like France and Germany, which have been the architects of that project.