Who will pay for the euro firewall? 26 Jan 2012 Berlin is still against increasing the size of the euro zone’s warchest. But the rest of the world doesn’t want to raise the IMF’s firepower unless the zone beefs up its own. If a deal is done, it seems likely that the Europeans will pick up 70-80 pct of the tab.
Ireland’s bond swap shows how self help can work 26 Jan 2012 Greece is defaulting, Portugal may follow, but Ireland is raising funds. Dublin’s 3.5 bln euro bond swap eases fears of a liquidity crunch and will help the country return to markets during its IMF programme. It’s a step closer to normality for Ireland, and Europe.
Euro zone soon to face Portugal default question 25 Jan 2012 Will Portugal follow Greece into default? The country’s bonds are beaten-up, and the country is struggling to keep up with fiscal targets, but Lisbon won’t necessarily join Athens on the D-list straight away; a Portuguese debt haircut remains a political decision.
Worst might be over in euro debt crisis 24 Jan 2012 Greece could still have a hard default and Portugal remains worse than a question mark. But the main reason there’s a regional crisis is that investors think there is one. Now they could be changing their minds, thanks to money from the ECB, plus some fiscal and political resolve.
What would a Greek plan B look like? 24 Jan 2012 If brinkmanship over a “voluntary” debt restructuring fails, Athens will be staring at a hard default. The challenge will be to prevent it being a messy one. That means bailing out Greek banks. But even after that, the country’s official creditors may save money.
Italy needs markets to keep pressure up 24 Jan 2012 Mario Monti’s liberalisation reforms are already producing a backlash from vested interests. Opposition will be even tougher when he tackles labour rules. Eventually, Italy needs lower bond yields. But for now, 6 percent yields are needed to scare Italians into backing change.
Hugo Dixon: EU shouldn’t rely on bailout from ROW 23 Jan 2012 The IMF is asking for another $600 billion to help deal with the euro crisis. But the euro zone, which is vastly richer than most of the rest of the world, should find the money to solve its own problems. It’s the developing world that may need help if the euro blows up.
European markets’ cheer may well run out of puff 19 Jan 2012 ECB-fuelled liquidity is supporting euro zone bond markets while equities stand to benefit from the lower currency. Pan-market optimism may be merited: but only if both factors spur economic growth. If the EU economy stagnates, the new year buoyancy could rebound on investors.
Social VAT – great idea for after the revolution 18 Jan 2012 Also known as fiscal devaluation, a shift of taxes from labour to consumption might help euro zone members rebalance trade. But the actual effect would be limited. The real appeal is conceptual. When goods are ample and jobs are scarce, taxes should not discourage hiring.
Euro zone’s New Year hopes hit triple downer 16 Jan 2012 Standard & Poor’s has stripped France and Austria of their triple-A ratings, and cut Italy to the same level as Ireland. Greek debt talks have broken down. The ECB has criticised the region’s fiscal pact. After a brief lull, Europe’s debt crisis is back with a vengeance.
Hugo Dixon: Watch Athens more than S&P 16 Jan 2012 The biggest source of immediate trouble for the euro zone could be the one country S&P didn’t examine in a review that led to the downgrade of France and eight other states. Even if the short-term shoals can be navigated, the rest of the zone won’t easily get shot of Greece.
What Europe needs now: a new Padoa-Schioppa 11 Jan 2012 The Italian economist died before his much-loved euro’s existence was threatened. As one of the fathers of the single currency, he understood the risks, but also the cures: more central banking pragmatism, more idealism about Europe, and deeper thinking about sovereignty.
ECB will find it hard to avoid pain on Greek debt 10 Jan 2012 The central bank’s refusal to participate in the Greek debt restructuring becomes harder to sustain as Athens threatens to become more coercive. And any attempt to spare the ECB losses will make it look as if it enjoys implicit seniority, pushing sovereign yields even higher.
Euro crisis could make IMF bigger and softer 9 Jan 2012 Europe’s travails are an opportunity for the IMF. Its kitty is nearing $1 trillion and should get heftier in 2012. And loan conditions may soften if more powerful nations come asking for help. There are risks, but this is preferable to ever rising national currency reserves.
Hugo Dixon: Semantics could help euro 9 Jan 2012 There is a crying need to distinguish between fiscal austerity and structural reform. The endless austerity programmes adopted by the GIIPS could spiral out of control. By contrast, structural reform could make them dynamic.
Greece and Europe need bonfire of the bondholders 6 Jan 2012 Athanasios Orphanides, an ECB governing council member, says the euro zone should drop plans to impose losses on Greece’s private creditors. That might calm markets, but it wouldn’t solve the problem. It could also strain relations within the euro zone, storing up another crisis.
Spain’s bank plan risks being more of the same 6 Jan 2012 The country’s economy minister wants lenders to set aside another 50 billion euros to cover property losses. That sounds good in principle, but doesn’t explain how the banks will pay for it. Forcing weaklings to merge with stronger rivals can help, but is no magic bullet.
2012: the year citizens will pronounce on the euro 3 Jan 2012 Markets and governments have spoken. It’s the turn of populations to declare, in elections and referendums, whether they want to do what it takes to keep the euro together. Governments will have to build a strong case to convince voters that breakup would be the worst outcome.
Greece needs to welcome foreign experts 29 Dec 2011 Athens is incapable of solving its problems on its own. The state apparatus isn’t functioning. What’s needed is outside help to rebuild it. First, though, Greeks need to stop viewing foreigners as invaders and see them as potential saviours.
Rome’s funding pain eases, but is not cured 28 Dec 2011 Italy’s funding costs halved in auctions on Dec. 28, as its bond market started to behave a bit more normally. Cheap ECB funds may have helped, as well as Rome’s new commitment to austerity. But while Italy has taken one step back from the abyss, it still faces huge hurdles.