Author Topic: Monitoring the EU Crisis  (Read 1170 times)

FitzFord

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Re: Monitoring the EU Crisis
« Reply #30 on: June 13, 2012, 23:45:45 GMT »
Here is a different way to see (literally) the debate. It is a link to perhaps (I think) the best TV discussion program in the US. It is hosted by Charlie Rose. This is a discussion of the EU situation with Rose, Gillian Tett (Fin Times) and Joe Nocera (NYT). What fascinated me was how, at various times, they edged up to the recognition that the only conclusive solution in the realms we have been discussing, then backed away from actually stating it. I could not resist the conclusion that there is an unspoken pact not to ever be so explicit, as that may doom it ever being seriously considered. Enjoy:

Tonight on Charlie Rose:
 
June 12, 2012
 
Tonight we look at the European debt crisis with Gillian Tett of 'The Financial Times' & Joe Nocera of 'The New York Times.' Next Mark Shriver on his book “A Good Man – Rediscovering My Father, Sargent Shriver.' We close with Adam Johnson on his book 'The Orphan Master's Son.'
 
www.charlierose.com
 

FitzFord

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Re: Monitoring the EU Crisis
« Reply #31 on: June 14, 2012, 13:51:24 GMT »
There is a story in the Telegraph today that Chancellor Merkel "addressing parliament in Berlin, rejected "miracle solutions" such as issuing joint euro bonds or creating a Europe-wide deposit guarantee  scheme ... Instead, she called for gradual steps towards the "Herculean task" of building a European political union." 

Should we now declare victory and begin to write Volume 1 of our proposed publication?

I think I know the likely answers, but I also think that we will all enjoy the way our colleagues express their views!

Fitz.

harnett

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Re: Monitoring the EU Crisis
« Reply #32 on: June 14, 2012, 15:51:53 GMT »
Thanks Fitz - well worth watching and a decent summary of the issues, especially the importance of political reform to be made hand in hand with economic changes.  of course as aid professionals we are already conversant with the issue of organisations that have numerous fingers on the decision making button (UN, EC, etc.) and how clear leadership is therefore rendered difficult.  It seems to me that the only rational way forward is for Germany to press for banking union a la Barroso with political union advanced at the same time - but as is expressed in the video - this is very unlikely.  I just wish they had said that if there was a committee to save the € then the deal would be to do this!!

Was a bit disappointed that the far left and far right are spoken of in the same light.

Martin Johnson

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Re: Monitoring the EU Crisis
« Reply #33 on: June 17, 2012, 09:50:44 GMT »
Writing as the Greeks are at the poles it occurs to me that many of the swing voters will have woken up this morning, some of the them with sore heads no doubt, with a feeling that some national pride has been restored and that there are some things that are not wholly negative about the nation just now - in the same way that many Russians will be waking up in disbelief at what happened last night. I suspect many of them, especially where a vote for the populist and somewhat mendacious left would be for some at least an expression of anger and frustration, may now consider using their votes to embrace the pain of austerity rather than the denial of reality offered by the left. Maybe that will be enough for Greece to form a government that accepts EU conditions for their bail-out (even if this were to represent just a postponement for the ultimate rejection of EU conditions). We won't have long to wait and see in any case.

FitzFord

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Re: Monitoring the EU Crisis
« Reply #34 on: June 18, 2012, 19:30:17 GMT »
On the 7/14 post I mentioned a story in the Telegraph that quoted Chancellor Merkel addressing Parliament, calling for gradual steps towards "the Herculean task" of building a European political union". The following day the Washington Post (can't find the paper at the moment, but if there is a request for the reference I will find it on-line) the German Finance Minister was reported as supporting for some time, the idea of a European Political Union. Clearly, this will not be achieved overnight (if at all), but various steps - a real Central Bank, a more substantial collective budget, seemed to be placed on the prospective agenda as steps towards this eventual political union. I assume that this story, in some form,  must also have been circulating in Europe. There are fascinating questions to be addressed if this is to go forward. Are there other known or suspected supporters of this objective and strategy? Who might they be? What would be a credible timetable, if this was to go anywhere? I think it would be interesting to try to construct a strategy and scenario(s) by which could actually be achieved. Any takers?

Fitz.

petagny

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Re: Monitoring the EU Crisis
« Reply #35 on: June 21, 2012, 17:28:36 GMT »
Fitz, sorry no original thoughts, but this is how Wolfgang Munchau summed up the present dilemma in Sunday's FT:

'The Bundesbank said there should be no banking union until there is a fiscal union. Angela Merkel said that there should be no fiscal union until there is political union. And François Hollande said that there should be no political union until there is a banking union. They have 10 days to disentangle that knot.'

Interesting that both Paul Krugman and Lawrence ('Larry') Summers are both drawing attention to the scale of fiscal transfers involved in a functioning monetary union and asking if Europe is really ready to bear them. Krugman writes in Tuesday's Herald Tribune:

'Consider, for example, what would be happening in Florida right now, in the aftermath of its huge housing bubble, if the state had to come up with the money fr Social Security and Medicare out of its own suddenly reduced revenues. Luckily for Florida, Washington rather than Tallahassee is picking up the tab, which means that Florida is in effect receiving a bailout on a scale no European nation could dream of.'

Krugman goes on to talk about the scale of the transfers following the 1980s savings and loan crisis, as does Summers (in Monday's FT):

'A good guess would be that during the US savings and loans crisis, the American south-west received a transfer from the rest of the country equal to at least 20 per cent of its gross domestic product. Is there a real will to commit to potential transfers of this scale in Europe?' [Not sure where the 20% estimate comes from as there is no reference in the article].

To finish, here's Willem Buiter in today's FT:

'The greatest fear of the core nations is not the collapse of the euro area but the creation of an open-ended, uncapped transfer union without a surrender of national sovereignty to the supranational European level.'

FitzFord

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Re: Monitoring the EU Crisis
« Reply #36 on: June 23, 2012, 18:11:05 GMT »
petagny, If Buiter's assessment is correct, the core nations also are correct  to fear this outcome. As we have been advocating, a genuine Central Government with appropriate authority is essential. The crtical aspect is to establish appropriate boundaries to that Central Government. While I do not regard the US structure to be the last word in its current manifestation, I do believe that it has the appropriate elements. I would look for an alternative to partizan selection of Supreme Court Justices, and as I have argued before, every one need not be equal in all elements except in with regard to instruments and incentives to do better. I think there is inherent fairness in categories based on performance against measures of principled behavior, and I don't believe it is beyond our ken (is that term still in use?) to design a reasonable and workable structure. Somehow, it appears that there is a huge lack of confidence that keeps everyone close to their bases. Yet it also appears that there may be a willingness to put a couple more cards on the table. (See the Washinton Post story below). It would appear that the major risks are of at least two types: waiting too long to seriously think through, and build support for, a sensible struture with sensible rules, before the system falls apart, and/or rushing to jerry-rig a solution that is easiest to sell, but in reality - to use a US phrase - kicks the can down the road, to the next crisis.

Fitz.

http://www.washingtonpost.com/world/amid-crisis-leaders-of-germany-france-italy-and-spain-meet-in-rome/2012/06/22/gJQAMaieuV_story.html?wpisrc=emailtoafriend

FitzFord

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Re: Monitoring the EU Crisis
« Reply #37 on: June 28, 2012, 14:33:12 GMT »

John Short

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Re: Monitoring the EU Crisis
« Reply #38 on: July 04, 2012, 14:26:34 GMT »
A bit frivolous but might make cheery reading for those depressed by it all.


Dummies guide to what went wrong in Europe

Helga is the proprietor of a bar. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem she comes up with a new marketing plan that allows her customers to drink now, but pay later. Helga keeps track of the drinks consumed on a ledger (thereby granting the customers' loans).

Word gets around about Helga's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Helga's bar. Soon she has the largest sales volume for any bar in town. By providing her customers freedom from immediate payment demands Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer - the most consumed beverages.

Consequently, Helga's gross sales volumes and paper profits increase massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Helga's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral. He is rewarded with a six figure bonus.

At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS. These "securities" are then bundled and traded on international securities markets. Naive investors don't really understand that the securities being sold to them as "AA Secured Bonds" are really debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses. The traders all receive a six figure bonus.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Helga's bar. He so informs Helga. Helga then demands payment from her alcoholic patrons but, being unemployed alcoholics, they cannot pay back their drinking debts. Since Helga cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and Helga's 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Helga's bar had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations; her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government. They all receive a six figure bonus.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who've never been in Helga's bar.

Now do you understand?

« Last Edit: July 04, 2012, 15:12:07 GMT by Napodano »

FitzFord

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Re: Monitoring the EU Crisis
« Reply #39 on: July 17, 2012, 15:32:03 GMT »

John Short

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Re: Monitoring the EU Crisis
« Reply #40 on: July 18, 2012, 07:30:09 GMT »
Not being British, but happily living there, I suspect this does represents the gripes of the woman and man in the street with respect to over regulation on not relatively important issues in the grand scheme of things, but maybe to them as individuals.  However, translating this sentiment to a withdrawal vote may be a different thing.  Perhaps the Vote on Scottish independence may provide a pointer!

FitzFord

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Re: Monitoring the EU Crisis
« Reply #41 on: July 22, 2012, 15:20:10 GMT »
I have been waiting for someone to do this assessment that I have posted below - it is from the Washington Post, by one of its best investigative columnists. I was hoping that one of the monetary economists would write on this, as I don't fancy myself as better than literate in this area (I think I understand what they say), but I suspect that Ignatius has really done his usual thorough homework, and talked to knowledgeable experts. Have you read or heard of similar assessments?

Fitz.

http://www.washingtonpost.com/opinions/david-ignatius-central-banks-face-a-giant-bill-coming-due/2012/07/20/gJQALdJsyW_story.html?wpisrc=emailtoafriend


FitzFord

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Re: Monitoring the EU Crisis
« Reply #42 on: July 26, 2012, 17:24:47 GMT »
I am breaking my promise to myself - to not post anything during the Olympics - because I could not resist this one:

http://www.washingtonpost.com/opinions/anne-applebaum-europe-must-face-up-to-ongoing-euro-crisis/2012/07/25/gJQAnYey9W_story.html?wpisrc=emailtoafriend

Enjoy the Olympics respite...


Fitz.

FitzFord

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Re: Monitoring the EU Crisis
« Reply #43 on: August 01, 2012, 17:05:44 GMT »
I must confess that I am surprised that you are reading these postings despite much more action available in the Olympics. As I suffer from the same weakness, I thought I should acknowledge your commitment (?) with this posting from the NYT. Do any of these ideas deserve a medal? If so, what metal?

Fitz.

http://www.nytimes.com/2012/08/01/business/economic-thinkers-try-to-solve-the-euro-puzzle.html?emc=eta1

STONE

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Re: Monitoring the EU Crisis
« Reply #44 on: October 08, 2012, 18:50:04 GMT »
Fitz,  Just saw this in Le Monde - might dredge up an earlier part of the discussion.

http://economieamericaine.blog.lemonde.fr/2012/10/08/le-traite-budgetaire-europeen-et-la-lecon-americaine-de-1837/

FitzFord

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Re: Monitoring the EU Crisis
« Reply #45 on: October 11, 2012, 15:44:11 GMT »
Stone,

Is there an english translation for those of us whose French is inadequate? From my limited interpretation, it does seem worth reading accurately!

Fitz.

Napodano

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Re: Monitoring the EU Crisis
« Reply #46 on: October 12, 2012, 08:33:39 GMT »
In case Stone does not find it in English, try

http://translate.google.com/

The quality of the transaltion has increased significantly recently.

FitzFord

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Re: Monitoring the EU Crisis
« Reply #47 on: October 21, 2012, 15:55:49 GMT »
Thanks Napodano! I was able to read it in this version of the translator. I do think the article misses key aspects of the US Federal system: a considerable proportion of States expenditures come from the Federal budget and there are no population migration limits between States, thus those who are recklessly profligate have at least 2 sources of relief while they get their act together, while still suffering some penalty while they recover. The EU has neither of these options...

Fitz.

 

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