The euro-zone crisis

Time to celebrate?

Government-bond markets in peripheral countries are soaring

See article

Readers' comments


Nom Deplume


JRC83 in reply to Nom Deplume

Correct, everything you've said. Now add Italy, Spain, Portugal and Ireland to the mix, because the situation in all those countries is not very different. When a disaster of these proportions happens, one can't deny that the system, on a European level has failed. The argument held by the northern countries that this is their own fault because these countries are croocked and lazy is complete BS. The monetary policy has been catastrofic. When the people on those contries realise that their futures have been squandered by the righteous absurdity of their neighbours up north, there might be a war

LVX in reply to JRC83

Europe is indeed failing.

It failed in laying out a groundwork that would have helped preventing this situation and is failing now to unite more rather than let the south bleed to death.

But blaming the north rather than seeing everyone's contribution in it is self-deceptive and short sighted.
We're all in it, many different parties are to blame and the solutions can only come from a concerted effort by all the parties involved.

Risk Manager

Is EUrope about to open up its markets to freer trade in response to this crisis?

Well, all of European history suggests not.

Given the socio political breakdown now spreading across a good proportion of the Eurozone a turn to protectionism is more likely. Should any country leave the Eurozone then protectionism will be swift and brutal.

Its "what they are like". Its why the UK cannot stay with them. We are different. Its a shame.

Risk Manager in reply to JRC83

It is odd how the BBC that so assiduously promoted UK Euro entry still seems to have some credibility when reporting on matters economic. And others. The Euro is, after all, the greatest disaster in economic policy for a generation, bar none.

Sigfried1871 in reply to Risk Manager

you opt out because England has been historically seen always the greatest unsolidaric, and most selfish country in whole Europe. go and leave as we hate cherry picking bankster driven systems headed by an totally outdated scharade called monarchy..

Risk Manager in reply to Sigfried1871

Well thanks for that. Lucky us Brits selfishly resisted Germany in 1941 wasn't it? I recall a recent recent global survey of world "soft" power showed the hegemony was, well, British. Ho hum. Looks like the people of the world would differ with the people of Europe. Fancy that!
The problem with Europe it seems to me is the nature of European people. Its a shame.

ZA Observor

Central bankers (Fed, BoE, ECB) QE and guarantees have reversed the collapse of the financial system since 2007/8 - the challenge now, is to redirect the extra money in paying off national debt on the one hand, while fighting austerity by means of trade pacts and stimulus on the other.

Opaque China remains steady in growing demand, which together with American fiscal cliff deals, incrementally restores cautious "risk on" faith in markets. Many of the current European governments will fall victim to voter anger, leaving at most an 18-month window for the EU to expedite trade pacts with the US, BRICs and Asia that will stimulate economic recovery. Sure, EU-wide banking will help but it's trade that buys the whisky, tourism which will refloat the tragicomic Greek boat.

Celebration may be premature, as the outcome hinges on US policy and the quality of bipartisan political deal making. Mr Obama will set the standard for the quality of compromise that can be accomplished in

* repaying debt by redirecting quantitative easing liquidity
* freeing the world economy from the artifice of a low US debt ceiling limit
* budget re-allocations away from military spending towards making the US energy independent of OPEC price manipulation
* promoting trade pacts with Europe, Mexico, BRICS, Australasia
* creating a bipartisan working group for incremental social security and tax reforms that re-align policy and benefits with changing demographics and means over a more realistic medium term time frame.

The real question, maybe whether Republicans put domestic party-political point scoring ahead of a shaky world economy - a question which will be answered within the next few months.

Nom Deplume in reply to ZA Observor

Good analysis. I would add though it isn't just the B part of BRICS for the USA. It is the entire North and South American areas we really should be working for better trade environments. I realize Brazil is the 'big player' in South America, but the others combined with only a few percentage point increases in trade value could bring Billions into the US economy.



JRC83 in reply to timshel

The problem is that The Economist has a problem of esquizofrenia, it says things that are contradictory on it's articles sometimes. But it's ok, we love the Economist all the same (at least I do!)

A Wonderer





Nom Deplume in reply to A Wonderer

"In my view, it is on the right track, except for one concern as well as opportunity areas - EU has a much more sound regulatory framework and better public infrastructure than US." - I have two comments on this piece.

First, the fact that the US public infrastructure is in such need of update and repair is actually relatively a 'good thing' in that it will bring much needed work to Americans since it is quite difficult to 'offshore' infrastructure work bringing much needed jobs in coordination with much better infrastructure which will help in the short, mid, and long term make us more competitive. The second is the '...more sound regulatory framework' piece. I can't tell if you are being sarcastic or not? To say the EZ and EU have a better 'regulatory framework' when it is a complete patchwork of laws, regulatory bodies, overlaps between EU and national decision making bodies and factors is simply errant nonsense. We have been watching just how bad the 'regulatory framework' is for the last 4 solid years. Did you miss a meeting or something? They have simply ripped up and thrown on the floor multiple treaties (Masstricht comes to mind), ignored rules, set themselves up for some seriously adverse electoral results, etc. etc. A final note on the 'they will attract an educated young workforce from Asia and ME...' Really? When the tax rates are punitive, the austerity has begun creating some serious issues with social services, the prospects are bleak in the periphery, and nearly across the board the EU countries are tightening the entry requirements for foreign students, etc. So... why again would young people see the EU as a good choice to emigrate to? Young people are fleeing the EU periphery countries. 'Brain Drain' is endemic in countries like Greece and Spain at the moment. The USA is seeing record numbers of applicants from these countries and you think people from Asia (growing as a whole at 5%+ every year) and the ME (Arab Spring creating new opportunities all over the place) WANT to come to the EU? Really? Have you spoken with many of them?

JRC83 in reply to Nom Deplume

That's the best comment so far in this article. I say your comment is better than the article written by the economist, straight to the point and nothing but hard facts.
The germans have managed to plunge Europe into the abyss once more. It amazing, history repeats itself again and again, we dont learn anything.





shaun39 in reply to reader735


JRC83 in reply to shaun39

Huge budget deficits are being run at this very moment Mr. What do you know exactly about the pension system in Italy or Spain? Other than it desperetely needs to be reformed?

Have you read about The New Deal? By a monsieur named F. Roosevelt?

The problem in Europe is unemployment, not the pensions in Italy or Spain.

flyingdutch100 in reply to JRC83

Unemployment is a consequence, not a cause.
The high debts of the Southern countries, which make them vulnerable on the markets are the cause.
How does one sustain low pension age, high pension rights in an inefficient, uncompetitive economy? By borrowing money.
"Shaun's" analysis is correct.
I strongly hope that the British will stimulate the Dutch to get out of the money transfer to the South.
Than I do not care if Draghi promisses endless bond-buying with mutual liability between Greece, Italy, Spain and Portugal. Have fun among yourselves...

JRC83 in reply to flyingdutch100

You don't know what you are talking about clearly. Unemployment a consequence, not a cause?

Do you know the effective retirement age in those countries? Perhaps you should inform yourself before stating your opinion and making a fool of yourself.

If the euro breaks up, netherlands, as much as Germany looses the most. Again, read a little bit, inform yourself, educate yourself, before throwing opinions around.

If you remember, Greece was about to throw a referendum back in 2010, to leave the Euro, do you know what happened? That all the politicians in the northern countries went ape and didnt allow that to happen, because they knew that if there had been such referendum, the greek people would have voted to leave the euro. Instead, what happened was that Papandreus was booted from the office, and another guy, chosen by the european politians replaced him.

My dear dutch ignorant friend, the euro is not something benefiting those southern countries you despise so much, more likely on the contrary.

shaun39 in reply to JRC83

Unemployment is a serious problem - some of it is inevitable given the pace of structural change, but far more investment in human capital & active labour market polices would certainly help.
Pensions are actually a bigger problem than unemployment, in the long run. Life expectancy is rising rapidly towards 90 and will carry on beyond that; people are spending ever larger proportions of their lives retired (out of work, but drawing very heavily on government funds). This in itself is awful; but it's made even worse by very low fertility rates (for decades). Both mean that dependency ratios (people on pensions relative to people in work) is rapidly deteriorating.
There are only three possible reforms for dealing with this:
- raise retirement ages (e.g. in line with life expectancy)
- raise fertility rate to near replacement level (but how?)
- cut size of public pensions, e.g. by capping all government paid pensions at the median wage level
Both Italy and Spain have made pension reforms - but neither have done enough to make their pension systems sustainable or affordable. In both countries, pensions are a bigger fiscal problem than the national debt (and fixing pensions would make debt levels look far more sustainable, reducing bond yields & boosting growth).
The Scandinavian countries and some of Eastern Europe are seriously addressing pensions. The rest of us (UK, France, Spain, Italy, US) are going to have a very hard time implementing higher retirement ages and lower pension levels (at least for rich recipients). That is political dynamite - and it is the responsibility of national governments to stop telling lies (stop promising the impossible) and actually shift to sustainable pension models.
Only nation states can handle that - most people have totally absurd expectations/ perceptions on pensions (it isn't a question of rights; pensions are a transfer that has to be paid for by working people).
Failure to tackle pensions means:
1) higher bond yields, lower levels of investment and fewer jobs for young people and
2) higher payroll taxes, higher barriers to employment and fewer jobs for young people
National governments and media have to make the constructive case for much higher retirement ages (i.e. 70-75 over the next 20 years). That is the only path consistent with opportunities for economic growth & jobs for young people (while still providing 15-20 years of retirement with a decent pension).

shaun39 in reply to flyingdutch100

Thanks for the back up on the need for sustainable pensions. And you're right - extremely high unemployment rates are in large part a consequence of high bond yields & strangling of credit to productive businesses. Proper pension reform would bring down those yields and reduce unemployment rates.
Actually, the Netherlands isn't transferring much to the South:
1) Dutch net contributions to the EU budget are less than Dutch foreign aid. It's probably fair to say that the Netherlands gets far more for its money with EU spending (i.e. massive EU markets, growth, security, effective negotiation of deep free trade agreements, going much further than anything that Switzerland or Singapore have managed, and going much further than Congress would allow the US to go; opening of developing countries to free trade) than it gets from handing cash to third world countries.
2) In theory, the Netherlands should get its bailout money back with interest. Yields on bailout money are far above 10 year Dutch bond yields. So, win-win. Since bailouts come with tight deficit reduction requirements, which are actually working, and since most recipient countries now have current account surpluses, the Netherlands almost certainly will get its money back (with interest; at profit).
3) Draghi's promise is to unlimited bond-buying is strictly conditional on bailout programme compliance and movement to a sufficient budget surplus. And operation of such a budget surplus would in itself result in the winding down of ECB bond buying. Thus, Draghi;s promise is only a promise of unlimited liquidity provision; it is not a mutualisation of debt or risk. Yet, this liquidity provision is essential for removing bondholders' fears of refinance risk (which have potential to become self fulfilling). OMTs really were the perfect solution - and are probably the optimal design for the eurozone (in all probability, their existence guarantees that they will never have to be used anyway).

MilovanDjilas in reply to shaun39

Hello Shaun,

Love your posts. Thanks for writing. I am getting quite tired of repeating myself. Since I am a southerner, apparently my word counts for nothing with these racist jerks. Even when I provide citations, proof, figures, etc.

One point of clarification however, regarding pensions in Italy. Yes, pensions still are a problem here, but not generally for the reasons that might be believed up north or in the US.
First of all, most foreigners have not bothered learning the details of Italian finances. They therefore make assumptions based upon other problems in the western world - but we are not really a western economy.
Italy is one-fourth Mediterranean (Greece or Syria), one-fourth the Italy of tourists (Rome, Florence, Venice), one-fourth Central Europe (generally the dominant part - our modern history has paralleled no other country so much as Hungary) and one-fourth Western Europe (Milan, Turin and Genoa).

Unlike other western countries (including Germany) there is no pension time-bomb ticking here. Future pensions have already been reformed and slashed. Instead, the "time-bomb" has "exploded" now, and we are facing the greatest pension expense in 2013 and the next few years. This because our Greek-like scandalous pensions were reformed in the 90's in the wake of the Maastricht Treaty - but we are still carrying on our backs all the old, pre-1995 pensioners.

Our retirement age has already been increased and is currently a few months LATER than Germany's. The problem is essentially our Golden Pensioners - those who receive from €3,000 to €90,000 monthly - who are 500,000 individuals out of 16 million total pensioners in a country of 61 million. These pensions are generally paid neither to former workers nor former industrialists - and are instead paid to former State managers, generals, professors, politicians: what in our country is called traditionally the "sottobosco" (underbrush) of the political system - all those people whose positions were dependent upon political nominations.
Our pension expense is 16.6% of gdp - the highest in the world. Mario Monti receives a pension of €72,000 monthly. Our national and regional politicians are more or less guaranteed a pension of about €10,000 monthly after 10 years "service" in parliament. Even that slut Cicciolina receives €3,000 monthly for the 4.5 years she spent in our parliament 25 years ago, having reached the venerable age of 60 some months ago.
And no, hardly anyone is speaking publicly about cutting these Golden Pensions. Which, at €27 billion represent an annual expense of 1.8% of gdp.

Every time someone (let's say abroad) mentions "cutting pensions" in Italy, our politicians cut my by-now-non-existent pension in 2030 (as if the problem were pension expension 20 years from now) or they cut the pensions of those who receive 1000 euros or less - but never the Golden Pensions, which are apparently untouchable because our elite "earned" that money.

Really, if we had any friends in the north of Europe or Brussels, instead of pandering to Monti, or complimenting us on our reform progress or insulting our competitiveness or insulting the Italian people or expressing racist ideas that we are all "corrupt"... (none of which hit the mark)
...there would just be one loud and clear message aimed at our politicians:
"There is no way Italy can continue inside the Euro paying such exaggerated pensions to its (essentially worthless) political class."

shaun39 in reply to MilovanDjilas

1.8% of GDP? That sounds like a very good way to achieve a big (confidence boosting) budget surplus next year.
Save another 0.4% of GDP by cutting military spending to German levels.
That would boost confidence enough to bring 10 year bond yields below 3% (from 4.17% on Friday), saving an extra 0.4% of GDP or so within one year, and more still after that.
Lower government bond yields mean lower costs of investment finance for business (since government bonds are an effective floor price over which banks will charge a spread for greater risk & less liquidity). Lower cost of investment finance will mean higher investment in Italy - more demand today, more jobs, and higher productivity & incomes in the future.
And with the fiscal improvement outlined above, Italy would probably be in a good position to make moderate reductions to taxation of business investment (i.e. corporation tax, etc), bringing more of the grey economy into the official sector, and boosting business investment & jobs.
I'm optimistic that Italy could have a decade of strong growth ahead of it - precisely because performance has been so poor in the past one. Certainly, the fiscal, labour market, pension & tax reforms of recent years are now filtering through and improving Italy's trajectory (unemployment will continue to rise for H1 2013 but should then improve). Yet as you point out, some low hanging fruit has not been plucked yet, and Italy needs reform to make government spending more equitable (historic pensions included).


Life expectancy in Italy is rising by 2.8 months every year (to think of it crudely, you only age by 9.2 months for each year you live). Italy's immediate fiscal position can be fixed immediately with just the measure you advocate. But for long term viability, it's important that Italy increments retirement ages with life expectancy (e.g. government could increase the retirement age by 66% of the previous year's life expectancy improvement, which on current trend means retiring 1.8 months later for every year that passes). Note that rising medical expenditure means anything less than roughly a 66% life-expectancy-to-work pass-through would probably result in stagnant or falling real wages (depending on rate of productivity growth).
With enough productivity growth (i.e. with business friendly regulation & taxes, and with competitive market structures which disrupt monopolies & break market power), working hours will fall:

shaun39 in reply to nadamasqueso

Agreed. Some more restraint/ calmness/ less stereotyping/ more effort at empathy/ less blaming/ less conspiracy theorising/ more constructive engagement is probably in order on all sides.
In perspective: the Economist comment threads are far more balanced & informative than those of any other media publication. Efforts to raise the tone are always needed however - so good call.

nadamasqueso in reply to shaun39

Cheers-the gulf between journalits' writings and readers' is enormous; not so with the media in general where most newspapers are staffed by illiterates,hence the pain from reading studenty,racist etc readers' comments.

MilovanDjilas in reply to shaun39

Sorry, I have read the most ridiculous opinions about Italy, Greece, Spain and Portugal on these blogs for three years.
Mr. "Nadamasqueso" is only the latest in a series of northerners to go on about the South even though "I have a lot of friends in Spain and I even live there."

MilovanDjilas in reply to shaun39

The problem with raising pension ages - and it has already been done here - is that nobody in the private sector is going to hire an unemployed 60-year-old. And almost nobody is going to continue employing a 60-year-old. This problem is not minor, as there are larger and larger numbers of people unemployed but too "young" for pensions.
No, we can't cut military expenses. Sherry/Emma is attacking Italy on other blogs here for not meeting the NATO 2.0% requirement and she is not entirely wrong. Monti's government, now defunct, had been promising 200 soldier/advisors on the ground in Mali. Just the latest crisis to demonstrate that Europe needs a united military centered around France and Italy.
Germany is very far from Africa and the Middle East. Their moral, technological and political support is welcome and demanded (but generally not received these days) but nobody really expects Germany to make significant air, land and naval contributions.
The clear truth is that we must boost military spending by about 0.3% of gdp. Which means pensions must be slashed from 16.6% of gdp to no more than 15% of gdp and privatisations must be effected NOW. You will note that Monti did not privatise a stick of gum during his 14 months. That will take the Left in power: Italy is of course an upside-down country. I am serious - expect a boost of our military activities, particularly in Africa and the Holy Land, when the Left comes back to power. Especially if such a Left leader as Hollande is moving abroad. Our politicians will (correctly in my view) be inclined to follow. Pier Luigi Bersani has already expressed his full support for operations in Mali.

shaun39 in reply to MilovanDjilas

I guess we'll have to agree to disagree on the military. But I'm with you on the need to privatise and sell unproductive assets.
If 60 year olds struggle to find employment, that is the real problem (same as with 20 year olds struggling to find employment). The emphasis has to be on active labour market policies, continuous education & retraining, flexible labour markets, subsidised re-entry to employment, etc.
Anybody with a long working life should expect to have multiple careers. Between careers, education and retraining will often be necessary to become competitive in entering new careers.
Market structures need to be fixed so that employees don't risk becoming liabilities on their employers. Where businesses fear this outcome, they don't hire. It is workers that are hardest to assess (e.g. those without qualifications, or without references, or the oldest, etc) that are most likely to be discriminated against in a labour market where businesses risk having to make large pay outs/ risk being unable to sack.
Real labour market problems need to be resolved - government needs to eliminate protracted involuntary unemployment (which in practice, means labour market liberalisation, shifting to a pro-investment regulation & tax environment, more support for retraining, subsidies for getting back into work, etc).


Actually, despite high unemployment rates in the UK, it's quite easy for pensioners to find part time jobs (e.g. school bus drivers, "lolly pop women", supermarket cashiers, childcare, librarians). And in my first full time summer job (sorting & packing potatoes), the only other British workers were pensioners (it's a job that suffers from very high staff turnover, so they specifically recruit old people to save on induction & training costs).
Still, the Netherlands has broadly the best labour market set up in Europe (and probably the best worldwide) - that's what we should all aspire to.

flyingdutch100 in reply to shaun39

1. In our mind you cannot compare foreign aid to money transfer to the South. While almost nobody in Holland needs additional reasons to pay for the eradication of hunger, diseases and for water and seweage in the developing countries, everybody becomes more and more skeptical about paying for Italian corruption, profilgacy and status quo. Or for Greek corruption. I would glaldy double my taxes if I knew they are used to sustain the third world, I am not willing to pay a dime to get Italians on pensions on their 45.
2."In theory..." is exactly the statement of the former president of the Dutch central bank, two yeras ago. Now out of office he openly admits that we are not going to see thse money again. Which is ok, one can make a mistake, but continuing this policy is wrong and this is exactly why support for "all things Euro" decreases by the day. Not because we already lost money on the South, but because there is no sign things are going to change within the coming future.
3.I am perfectly aware that Draghi is promising endless liquidity, I am just wondering where does all the cash come from. Indirectly, the consequence will be the same: first inflation, than comparable bond prices, than mutualisation of debt. Italians are very good in finding out how to fix problems on someone else's pocket.

nadamasqueso in reply to MilovanDjilas

To be honest I don't disagree with a lot of what you say but if you feel your word counts for nothing you only have yourself to blame: you seem incapable of producing more than one comment that doesn't include either an attack on some group perceived as northern or attacking the south or a comment that suggests Italy is a victim unfairly,despite market or expert opinions,Plus the recent one here SUPERCILIOUSLY relegating Spain to a lower level than Italy.Most Spaniards I know have never seen Italy as in a better situation-the only area of jealousy :-) has often been "Italy is much better at corruption"



JRC83 in reply to shaun39


shaun39 in reply to JRC83

It's always easier to agree on joint institutions & policies, than it is to agree for elective spending on cross-border power grids & gas markets, or anything else where there is an implicit transfer of cash from some members to other members.
That said, previous EU budget negotiations have been far less contentious, and have been more supportive for the most stressed economies. Stinginess with Europe is a consequence of tight domestic finances (and very painful fiscal measures) in most states. When times are hard, people bicker (as any married couple knows).
So long as progress is made with institutions, there is still enormous potential for supporting higher productivity & growth. It's the institutions that matter most.


That last paragraph was 100% dead on!

shaun39 in reply to Jintelo

On the strong euro:

Jintelo in reply to shaun39

Did applying for a formal rescue improve the situation of Greece (or Ireland or Portugal), every time a formal bailout request was made the markets took it as signal that the country had lost, and yields shot up. I'm simply reminding people that if the ECB really chooses to print money to solve this than there's a strong likely hood of an inflationary coast. A debt load of 130% is not a stable position.. and even if i'm only half right that still means there's a 30% chance of bond holders losing there principle or taking a big inflationary haircut.

shaun39 in reply to Jintelo

Look at the 5 year history in Portugal:
or Greece:
What has brought bond yields down is:
(1) falling deficits make debt look more sustainable

shaun39 in reply to Jintelo

* in particular, if Spain were given 200 billion euro of low interest finance tomorrow (in instalments over the next years), bondholders would know (1) that Spain will not be issuing many new bonds, either to refinance old ones or to meet net primary borrowing and (2) the Spain may actually start conducting modest secondary market buy-backs.
Further, being within a bailout programme would improve certainty that politically tough reforms will continue to make progress for the foreseeable future.
On both counts, application for a bailout would be likely to improve market perceptions (and outcomes).
The greater risk is that a bailout application would be politically destabilising - if it somehow undermined confidence in Spain's government or triggered earlier elections. That seems unlikely though.
Either way, Spain is making progress - and will almost certainly return to modest growth by Q4, and will probably be booming by 2014 (every reduction in the cost to finance is very good fiscally and for business profits & exports; every little reduction in unemployment is great fiscally, for domestic demand & for growth; both yield trends and unemployment trends are self-reinforcing, and it seems that both have now turned downwards).

nadamasqueso in reply to shaun39

"BOOMING"-Presumably that was ironic? 5 or 6 million unemployed,whether they represent,still, 26/7% of the available workforce or whether so many leave the country,as they are definitely doing,that the percentage alters upward or downward,will still be 5 or 6 million.In a rising economic situation these people would be seen as "unnecessary".

shaun39 in reply to nadamasqueso

Yes - booming by 2014. As in, far above the long run growth rate.
That is a consequence of 25% unemployment. A reduction from 25% to 15% unemployment means a 13.3% growth of the employed workforce (that's not even accounting for the potential for people re-entering the workforce, or for the impact of rising retirement ages creating a larger workforce).
Now, marginal workers are likely to be employed less productively than the average worker. Even so, only modest reduction in unemployment would add an extra 10-15% to GDP growth over 4 or 5 years of economic expansion.
After the crash comes the boom. See Estonia for an advance example of what will happen in Spain - both had very similar investment booms & busts, both followed very similar policies and both demonstrated similar investment booms; only Estonia went faster and is more advanced on path to recovery (though still below pre-crisis output levels).

JRC83 in reply to Jintelo

I think you both have some good points, but I think shaun39 has the better arguments. It is true that the situation is quite fragile, but it is also true that the ECB has effectively unlimited fire power. We have all witnessed the power it has when Dragi pronounced his God-like words. The markets are not going to dare facing the ECB.
The fact is that the massive rise in sovereign yields was more due to FX risk than credit risk. With the break of the euro out of the question, those spread are drastically reduced. The risk of inflation which germans have been touting so much fron the beggining is nowhere to be seen.

Anjin-San in reply to shaun39

Do you still think this capital actually comes from Japan, accounting for the rapid appreciation of Euro against the Yen?

Jintelo in reply to Jintelo
and Catalonia makes a formal bailout request for 9 billion Euros, and I wasn't even aware of the greater rate of shrinkage Spain economy, 2.5% this year and next, after the effects of these together Spains debt ratio could even hit 140% in 5 years, with its high debt levels all it would take is a 1% point rise in borrowing rates to push Spain into insolvency. Even with ECB backing that math just doesn't add up so well, but the ECB was able to save Ireland, Greece, Portugal, Cyprus, and Spain's banks from bond market flight, so no reason to worry...


Certainly not! The Eurozone is still far from the optimal currency area.

sanmartinian in reply to vsamonis




Optimal currency areas are like ideal gases.

They don't exist.

vsamonis in reply to sanmartinian

Ideals do not exist but reasonable compromises do. Long ago I proposed to introduce Neuro and Seuro monetary zones to much better reflect large, rather contiguous areas in Europe with irreducible differences in productivity/competitiveness (except in some 100 years or so). Such a solution would be a reasonable compromise between EU wideners and EU deepeners and would salvage some EU integration achievements that are seriously endangered now.

Ronan Cudennec in reply to sanmartinian

In India, Bihar with 500$ of GDP/head would be happier with a much lower Rupee,that would avoid migration to other states of its workforce,and attract investments.
In Goa, with 5000$ of GDP/head and an influx of foreign tourists stoking local inflation, people would be happier with a stronger Rupee.

sanmartinian in reply to nadamasqueso

to namasqueso on GBP and GDP

I meant and mean GBP the abbreviation for decades in money markets for Great Britain Pound.
It was used instead of UKP, perhaps a better abbreviation, because the Scottish Pound still exists (nowadays you have to work hard to see one) and because at the time of inventing these abbreviations (the late 40's I guess) Great Britain was a far more usual designation than United Kingdom.
GDP obviously means Gross Domestic Product and has nothing to with this topic. If I'm not wrong it is abbreviated to PIB in your language if I'm not wrong in guessing it from your monicker.
Incidentally, what a great pen name you have invented for yourself. Congrats.
I'd seen it several times already but never had a chance to compliment you on it.

sanmartinian in reply to vsamonis

To vsamonis on Neuro and Seuro
There has been a lot of talk on what you call Neuro and Seuro.
Mostly by people who feel slighted by joining their currency with less rich or competitive member countries.
The vast majority of rational thinkers are against the idea. Northern Europeans because it takes away the benefit of having a low valued currency and so they would create a greater difficulty in balancing their balance of trade. Southern Europeans because it would decrease their defences against a speculative attack such as the 2010 one and having less easy access to financial markets.
Besides, they would destroy the political symbolism of the Euro: the unity of Europe. Far more than a financial tool, the Euro was a political tool launched a bit too early, a bit too hastily.
The European Union is almost certainly the most daring and progressive political experiment in History. At least since the inception of the USA.
To avoid being misinterpreted, neither I nor any rational thinker wishes the EU to become another USA. For that we have already one and it has performed and still does an excellent historical service.
Humankind, with occasional tragic back steps, always progresses along better forms of governance.The EU, if it survives, will provide some new form for Humankind to manage better its affairs, the shape of which we have no idea now as Americans didn't in 1776
It's early to guess but History teaches us that great political experiments take centuries to provide stable institutions and expansion of culture. Look at ancient Greece that took centuries to unite and expand its culture, or Rome ditto. Of the more modern cultural expansion empires Portugal took three centuries to expand, Spain one more, England some five or six. And I'm talking only of Eurocentric Empires. The pre Greek Middle East cultural expansion empires or Asiatic ones were even slower.
Just let's destroy two myths: political institutions and leaders never work well and are mere symbols of the political reality: the collective will. The EU has just survived brilliantly its first Toynbee crisis.
It's a good omen but it'll be some time before we know how it'll fare in the future.
Let's have a little more patience. In two hundred years we'll know whether the EU will have contributed for humankind to live better or not.

vsamonis in reply to sanmartinian

EU nirvana in 200 years! Good luck!

In the meantime, Europe is entering the Great Depression 2: beggar-thy-neighbor policies, currency wars, etc, and all kinds of ethnic/national strife. My N/S proposal is aimed at a rational compromise to avoid the EU disorderly collapse; hey, the UK is now on its way out of the ES! Who next?

vsamonis in reply to sanmartinian

Unfortunately, I almost exclusively hear EU officials being hopelessly biased towards status quo thinking. No outside of the box thinking! Their diagnoses are further flawed with an the anchoring bias, giving a disproportional weight to a preliminary knowledge around which a "solution" is built and then another "solution", etc; and which ignores the existence of all information/knowledge that does not support the desired position as top decision makers rely on others more to strengthen their preconceived thinking than to gain new knowledge.

sanmartinian in reply to sanmartinian

Four days later, I re-read this post and realized I must have been drunk when I wrote it.
That's a bit difficult as I've been almost a teetotaller all my life, but well, one never knows...
I wrote In South Carolina, Charleston, headquarters of BoA,...
I obviously meant "In North Carolina, Charlotte,headquarters of BoA...



Products and events


Take our weekly news quiz to stay on top of the headlines

