This post is re-posted from Yanis Varoufakis’ blog with his permission. CLICK HERE FOR THE VIDEO Thank you for inviting me. Thank you for being here. Thank you for the warm welcome. Above all thank you for the opportunity to build bridges, to pave common ground, to bring harmony in the face of blatant attempts to sow the seeds of […]
Tag: sovereign debt crisis
Yanis Varoufakis had a long interview on RT’s Boom Bust yesterday going into detail behind his political candidacy and what he expects SYRIZA to do regarding the unsustainable debt burden that the Greek government now has. Overall, despite his problems with the eurozone’s institutional structure, Yanis believes Greece leaving the eurozone would be a catastrophe for the simple fact that it does not have a currency and any attempt to leave would be seen as a prelude to a massive devaluation, inviting capital flight on a grand scale. This would be a catastrophe for the Greek banking system and wider economy.
By Willem Buiter This post first appeared on Vox Fiscal sustainability has become a hot topic as a result of the European sovereign debt crisis, but it matters in normal times, too. This column argues that financial sector reforms are essential to ensure fiscal sustainability in the future. Although emerging market reforms undertaken in the aftermath of the financial crises […]
With Ireland and Spain poised to leave Europe’s bailout mechanism, Europe appears to have weathered a very big storm. Yet, the Eurozone is still wracked with joblessness and economic growth remains elusive. What’s more, Europe’s institutional framework will not make a robust recovery easy. This virtually guarantees political and social tension for some time to come despite today’s apparent successes.
Private and public debt in the Eurozone increased since the 2000s, and especially so in certain countries. This column presents evidence that high levels of private and public debt, together with deleveraging of all sectors, are especially harmful for economic growth. Private sector debt is more detrimental to growth than public sector debt. Therefore, policies aimed at reducing the private debt could yield important benefits.
Current-account deficits have caused problems in several Eurozone countries, but surpluses are also an issue. This column argues that surpluses are detrimental to the welfare of the population to the extent they are driven by structural weaknesses affecting demand. Addressing these issues through structural reforms, while letting wages and prices respond flexibly to market signals, would be welfare-enhancing for the surplus countries.
This morning I made the argument that the global economy is growing across the breadth of developed and developing economies. I still have a problem with Europe though as I believe the risk is to the downside. Basically, the policy response is deflationary, just as the U.S. Treasury has written. I didn’t write enough though because while I pointed to the likely outcome from America’s asset bubbles, I failed to talk about likely outcomes in Europe.
Summary: Pippa Malmgren discusses the eurozone with Bloomberg below, calling attention to the diverging interests within the eurozone as a critical factor adding stress despite the relative calm we have witnessed in markets of late. Her view is that this could still lead to eurozone breakup.
The Eurozone’s tangle of conflicting goals – a series of ‘trilemmas’ – is not without precedent. This column argues that it is reminiscent of the interwar situation. The interwar slump was so intractable not just due to financial issues, but also a crisis of democracy, of social stability, and of the international political system. The big difference in the EZ is that nations cannot go off the euro as they went off the gold standard. That is why the initial EZ crisis may not have been so acute as some of the gold standard sudden stops, but the recovery or bounce back is painfully slow and protracted.
What follows is an interview I did over the summer with the Madrid based publication The Local.
Remember how French President Hollande was saying a month ago that the euro crisis is over? Well, he was wrong. Today portugal’s yields on 10-year paper vaulted to as high as 7.9% before settling back down again.
The ECB’s forward guidance last week was begun with unanimous support including the German contingent. I think this is a very significant development in the European sovereign debt crisis because it moves the ECB that much closer to full blown monetisation. A few brief comments below