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EU Summit Dinner Menu: Indigestion

Marc Chandler — Wed, 23 May 2012 16:14:23 +0000

The EU informal summit will be held over a dinner and despite the attention it is receiving, it still seems unreasonable to expect anything concrete. Today's informal EU summit is not the real thing. It is out of the late June summit that a new effort will likely emerge

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Chart of the day: The Grexit decision tree

Edward Harrison — Wed, 23 May 2012 15:00:19 +0000

The Financial Times has gone through the very useful exercise of creating a decision tree on what a Greek exit from the euro zone entails. I think the Europeans are now actively preparing for a Grexit because to not do so would be folly. But that doesn't mean that they want Greece to be forced out. Much of what we hear for public consumption is real. But much of it is also political posturing to improve negotiating positions. This decision tree can be helpful in figuring out what's real and what's just bluff

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Hoover on austerity to balance the budget and defend the dollar in 1932

Edward Harrison — Mon, 21 May 2012 18:19:18 +0000

I have written quite a few posts highlighting the statements made by Herbert Hoover during his US presidency as he struggled with the economic contraction of the Great Depression. The general tenor of Hoover's comments and actions goes to redoubling efforts toward balancing the federal budget in order to bring back the fiscal discipline that Hoover felt was proper irrespective of the macro environment and that Hoover also believed would support the US dollar. In the past, some commenters have expressed doubt about Hoover's deficit hawk bona fides. Having looked through the assortment of Hoover documents at the American Presidency Project, what is clear to me is that Hoover was indeed committed to balancing the budget by cutting expenditure and raising taxes despite the economic slide

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Europe’s depressing prospects

Michael Pettis — Mon, 21 May 2012 16:40:03 +0000

By Michael Pettis Normally I don’t like to write about European prospects in the midst of a very rough patch in the market because in that case there isn’t much I can say that isn’t already being said. I find it more useful to wait for those recurring periods in which the markets recover and

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The euro zone has become a political economy black hole

Edward Harrison — Wed, 16 May 2012 21:00:21 +0000

Without going into the detail of my member posts, here's what I can say: it is clear Greece will eventually exit the euro zone. The question is the timing. But, the political about-face necessary to prevent contagion is a lot larger than politicians are now prepared to take

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Will the Greek exit be voluntary or involuntary?

Edward Harrison — Mon, 14 May 2012 15:00:49 +0000

Ever more voices are talking about the possibility of Greece leaving the euro zone despite the fact that there is no formal mechanism for a euro are member country to exit the single currency. This talk, however, makes sense because Greece's situation is untenable economically and politically. The Grexit is a question of when and how not if

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Spain: EU estimates for contraction now considerably deeper

Marc Chandler — Fri, 11 May 2012 15:37:53 +0000

This is not a good day for Spain. The day began with the EU Commission revising its estimates for the Spanish economy. The contraction is now expected to be considerably deeper. Spain unveiled its new efforts to address the banking problems. It is the fourth one since the crisis began and the second one since Rajoy became PM. Spain is forcing the banks to boost their loan loss provisions on real estate loans by 30 bln euros. They have already put aside about 54 bln euros. The Center for European Policy Studies warns that bank losses could be as high as 380 bln euros. Moody's estimates Spanish bank losses could be around 305 bln euros

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Super SGP coming – ECB: “A stronger and stricter fiscal framework is required”

Edward Harrison — Fri, 11 May 2012 14:00:01 +0000

The long-held view in German policy circles has been that the European sovereign debt crisis is a clear indication that the stability and growth pact (SGP) was not sufficiently robust in addressing fiscal discipline. The ECB is now addressing this with a policy paper

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Chart of the Day: Euro zone GDP by country

Edward Harrison — Fri, 11 May 2012 13:24:31 +0000

This chart was attached to a very good front page article in today's Wall Street Journal by Marcus Walker on How a Radical Greek Rescue Plan Fell Short. The article gives a blow-by-blow account on how the Greek crisis has unfolded and a detailed view on where each of the Greek and European leaders stood on various issues involved in Greece's debt restructuring. The chart itself demonstrates the enormous gulf between the size of the German economy and other economies in Europe, giving some sense of why the Germans (and the French) have come to dominate European policy discussions

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Spiegel: Kohl-era German documents reveal euro formation was about politics

Edward Harrison — Wed, 09 May 2012 12:00:31 +0000

"The German government has, for the first time, released hundreds of pages of documents from 1994 to 1998 on the introduction of the euro and the inclusion of Italy in the euro zone."

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