Cierre de los mercados europeos: 26.02.2014
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VIDEO: Cierre de los mercados europeos: 26.02.2014
Showing posts with label Euro. Show all posts
Showing posts with label Euro. Show all posts
Wednesday, February 26, 2014
VIDEO: Cierre de los mercados europeos: 26.02.2014
VIDEO: Cierre de los mercados europeos: 26.02.2014
Thursday, February 13, 2014
3,000 euro Google search: French blogger gets fined for re-posting indexed govt files
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3,000 euro Google search: French blogger gets fined for re-posting indexed govt files
Wednesday, December 4, 2013
Robust U.S., euro zone data hurts euro zone bonds
Robust U.S., euro zone data hurts euro zone bonds
http://currenteconomictrendsandnews.com/wp-content/uploads/2013/12/fd3cd__p-89EKCgBk8MZdE.gif
* German 10-year yields hit 6-week high
* French debt risk premium at 6-month low
* Portuguese bond rally falters
By Emelia Sithole-Matarise
LONDON, Dec 4 (Reuters) – Euro zone bonds fell across the board on Wednesday as U.S. data showed growing momentum in the world’s biggest economy that could prompt the Federal Reserve to start scaling back its monetary stimulus soon.
German 10-year yields rose to their highest in six weeks, with the euro zone’s safe-haven debt underperforming the rest of the market, notably French bonds, whose 10-year yield premium hit its lowest in six months at around 40 basis points.
Bunds were on the back foot early in the session after data showed the pace of recovery in the euro zone private sector slowing but ahead of market expectations.
The sell-off gained pace after stronger-than-expected U.S. employment figures – a precursor for non-farm payrolls data on Friday – that suggested the labour market is robust enough for the Federal Reserve to start trimming its bond purchases.
Investors are very sensitive to economic data before a European Central Bank policy meeting on Thursday and the Fed’s next policy meeting on Dec. 17-18.
“The ADP employment data was strong and people are saying it could lead to payrolls on Friday being robust as well and increases the chances of Fed tapering,” said Alan McQuaid, chief economist at Merrion Stockbrokers.
“The market is a bit nervous going into the big events of the ECB and the NFP (non-farm payrolls report), so going into that the bias for yields is going to be on the upside.”
Bund futures dropped 90 ticks to end at 140.38, pushing the cash German 10-year yields 9 basis points to 1.82 percent, the highest since Oct. 22.
Dutch yields and Finnish yields were up by a similar amount, while Italian equivalents were 7 bps higher at 4.16 percent .
FRENCH SWEET SPOT
French bonds slightly outperformed the bloc’s other higher-rated paper, pinching their yield gap over German Bunds by 4 bps to 40 bps, its least since May 20.
The risk premium on French bonds has been grinding lower over the past month as investors shrugged off a one-notch Standard & Poor’s one-notch downgrade of the country’s credit ratings. S&P warned the pace of reforms was not enough to put the euro zone’s second largest economy back on track.
Although market participants have expressed concern at France’s slow pace of reform, and that it could struggle to push through further unpopular changes, its ability to fund itself is solid and investors continue to like its liquid bond market.
“This is a country where access to capital markets is unquestioned, especially in an environment where the ECB has spoken out its willingness to help out sovereign members,” said Kommer van Trigt, head of rates team at asset manager Robeco.
“What you see in the market is day-by-day, spreads are very stable for France, and also the interest of, for example, Asian investors remains very high … If you look at our portfolios we are not overly cautious on French government bonds.”
At the lower end of the credit spectrum, a rally in Portuguese bonds triggered by a move to lower the country’s near-term refinancing burden stalled, caught up in the broader market sell-off. There were also some lingering concerns that Lisbon may need more international aid.
The country swapped 6.6 billion euros of short-term bonds for longer-dated ones on Tuesday, a larger than expected amount that moves it closer to its goal of regaining market access next year as it exits a 78 billion euro bailout programme.
But Portugal still has to repay 5 billion euros of bonds maturing in June and 6.2 billion euros in October. Some analysts are wary that the country may need at least a precautionary credit line if not more cash from international lenders to finance those debt expiries.
“Standing completely on their own is going to be very difficult,” said Peter Shaffrik, head of European rates strategy at RBC Capital Markets.
Read more about Robust U.S., euro zone data hurts euro zone bonds and other interesting subjects concerning Bonds at TheDailyNewsReport.com
Monday, December 2, 2013
VIDEO: Cierre de los mercados europeos: 02.12.2013
Cierre de los mercados europeos: 02.12.2013
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VIDEO: Cierre de los mercados europeos: 02.12.2013
Sunday, November 24, 2013
VIDEO: ECB"s Draghi Kicks Back Proposals On Sovereign Debt Risk-weighting
ECB President Mario Draghi has kicked back a proposal from advisors to change the way sovereign debt is risk-weighted and asked them to do some more work on it, German weekly news magazine Spiegel reported. The euro zone’s sovereign debt crisis has highlighted the dangers of banks buying its government bonds as a theoretically safe buffer against risky investments, particularly since holders of Greek bonds took a hit in the country’s bailout. The measures suggested by the advisors could have a big impact on how crisis-stricken states finance themselves in the future.
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VIDEO: ECB"s Draghi Kicks Back Proposals On Sovereign Debt Risk-weighting
Friday, November 22, 2013
Exclusive: Euro zone mulls cheap loans as incentive for economic reforms -document
Exclusive: Euro zone mulls cheap loans as incentive for economic reforms -document
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BRUSSELS
File picture shows European Union member states’ flags flying in front of the building of the European Parliament in Strasbourg, April 21, 2004.
Credit: Reuters/Vincent Kessler/File
BRUSSELS (Reuters) – Euro zone governments are considering cheap loans to governments as an incentive to undertake structural reforms which pay off only in the medium-term, an EU document showed on Friday, introducing for the first time a discussion on fiscal transfers.
The document will form the basis of discussions of senior euro zone officials who will meet in Brussels on November 26 to prepare the next European Union summit on December 19-20.
The loans would be part of so-called contractual arrangements, which would be legally binding contracts with economic reform targets and macroeconomic milestones that trigger the payout of tranches of the agreed loan.
The loans would be attractive because they would carry an interest rate lower than the one a government could get on the market. In that respect, it would amount to a degree of subsidized lending, ultimately amounting to a mutualizing of risk among involved member states and a degree of financial transfer – an idea that Germany has long resisted.
“Loans would imply only limited fiscal transfers across countries,” said the 9-page document, obtained by Reuters.
“Indeed, the transfer element would be limited to a lower interest rate than the market rate of most beneficiary Member States, capturing the positive externality of the reforms for the EU as a whole,” it said.
To qualify, countries would have to draw up legally binding plans for reforms that would then be approved by other euro zone states. The conditionality would come on top of other macroeconomic programs such as the Stability and Growth Pact and the eurozone’s new budgetary oversight powers.
The size of the loan would not be linked to the cost of reform and would be meant as general support for the economy. It is not clear what time-frame the loans would be offered for, or what the limit on the size of any loan would be.
“The specific amount of financing would not be linked to the direct cost of reforms, which generally is difficult to measure,” the document said.
“Financial support should be conceived as an incentive or as general support to the overall economy rather than as a compensation for the specific cost of reforms as such, as well as a broader signal of European support to the economic reform agenda of each Member State,” the document said.
The loans would not be available to countries running excessive macroeconomic imbalances or currently under a bailout. However, an official briefed on the document said a country like Ireland, which is about to exit a program, could, for example, request a contract and if approved, benefit from the cheap loans.
The document did not specify how exactly the loans could be financed, mentioning only a European Commission idea from March that it could be either through direct contributions from governments or through designating a new revenue source.
One possibility, the official indicated, might be for the euro zone’s rescue fund, the European Stability Mechanism, to raise money on international markets and on-lend capital to a contracted member state, although the exact framework and process of the lending is yet to be finalized.
(Reporting By Luke Baker and Martin Santa)
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Sunday, October 20, 2013
Euro Soars As The U.S. Dollar Continues To Sink - By Gregory Mannarino
October 19th, 2013
October 19th, 2013 |
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Euro Soars As The U.S. Dollar Continues To Sink - By Gregory Mannarino
Wednesday, August 14, 2013
Germany, France pull euro zone out of recession
France’s President Francois Hollande (R) and German Chancellor Angela Merkel attend a joint news conference at the Elysee Palace in Paris, May 30, 2013.
Credit: Reuters/Charles Platiau
BRUSSELS |
BRUSSELS (Reuters) – The euro zone’s two biggest economies, Germany and France, both grew more than forecast in the second quarter, reinforcing expectations that data later on Wednesday will show the currency bloc has moved out of recession.
The German economy grew by 0.7 percent in the second quarter of 2013, its largest expansion in more than a year, thanks largely to domestic private and public consumption.
France’s economy expanded 0.5 percent, pulling out of a shallow recession to post its strongest quarterly growth since early 2011. The expansion was driven by consumer spending and industrial output, although investment dropped again.
Overall euro zone figures due at 0900 GMT (4:00 a.m. EDT) are likely to show the euro zone economy grew in the three months to June, moving out of recession after seven quarters.
“The euro zone is set for a gradual economic recovery, helped by a sharp slowing in the pace of austerity, an acceleration in global demand growth and a sustained easing of uncertainty and financial stress,” said ABN AMRO’s head of macro research Nick Kounis, adding that a number of drags on growth remain.
A Reuters poll taken before the German and French releases forecast an expansion of 0.2 percent in the second quarter, the same amount the 18-nation bloc’s economy shrank by in Q1.
The overall picture is likely to be mixed, as peripheral countries such as Spain, Greece and Portugal continue to struggle with high double-digit unemployment, on-and-off political rows and painful austerity.
The Reuters poll, published on Tuesday, suggested the euro zone economy is not likely to gain real momentum before 2015, with quarterly growth not seen exceeding 0.4 percent before then despite recent signs of improvement.
Euro zone industrial production rose in April and June, construction output picked up after a weak first quarter hit by bad weather and joblessness fell for the first time in more than two years in June.
“I suspect there was likely a modest overall pick-up in consumer spending, given improved confidence, moderate inflation and slowing job losses,” said Howard Archer, chief European economist at IHS.
“Business investment also likely fell at a reduced rate given improved business confidence and the fact that it has fallen markedly for an extended period.”
The European Central Bank has said it will keep interest rates at record lows for an extended period of time to assist the fragile recovery.
UNEVEN, BUMPY RECOVERY AHEAD
Recent economic data and sentiment surveys had suggested the German economy was picking up after contracting in late 2012 and a weak start to 2013.
But look south and there is a different picture.
The International Monetary Fund said earlier this month that Madrid’s reform progress, fiscal consolidation and crackdown on external imbalances were bearing fruit, but that urgent action was needed to create jobs and stimulate growth.
The scope and form of the austerity drive in the European Union is now changing. Policymakers still say adjustments in excessive deficits and high debt are essential. But they now emphasize that any action taken must not choke growth and must help create jobs.
ECB President Mario Draghi said this month that labor market conditions remained weak, though he expected the bloc’s growth to benefit from a gradual recovery in global demand.
“Overall, euro area economic activity should stabilize and recover at a slow pace. The risks surrounding the economic outlook for the euro area continue to be on the downside,” Draghi said after the ECB rate meeting on August 1.
(Writing by Catherine Evans; Editing by Jeremy Gaunt and Toby Chopra)
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Germany, France pull euro zone out of recession
Tuesday, August 6, 2013
VIDEO: ECB has easing bias, not out of ammunition
European Central Bankl Policymaker Peter Praet says the ECB could plan for more low interest rates, easing bias and cuts if the inflation outlook gets worse.
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VIDEO: ECB has easing bias, not out of ammunition
VIDEO: ECB has easing bias, not out of ammunition
European Central Bankl Policymaker Peter Praet says the ECB could plan for more low interest rates, easing bias and cuts if the inflation outlook gets worse.
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VIDEO: ECB has easing bias, not out of ammunition
Tuesday, July 16, 2013
Shares, euro steady ahead of data, Bernanke
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1 of 7. A visitor walks past logos at the Tokyo Stock Exchange in Tokyo June 13, 2013.
Credit: Reuters/Toru Hanai
LONDON |
LONDON (Reuters) – European markets traded in narrow ranges early on Tuesday as investors shied away from major moves ahead of inflation and German confidence data and awaited further clues on U.S. monetary stimulus.
The broad FTSEurofirst 300 .FTEU3 share index inched up 0.1 percent and the euro was firm at $ 1.3070.
Markets readied for UK and euro zone inflation figures at 0830 and 0900 GMT and what is expected to be a third straight improvement in the ZEW German sentiment indicator at 0900 GMT.
Federal Reserve Chairman Ben Bernanke’s twice-yearly monetary policy report to Congress on Wednesday and Thursday was set to offer more clues on the U.S. central bank’s policy as it looks to wind down its stimulus program. “The recent mixed data shows how difficult it is for the Fed, and also consequently for the markets, to read when the first tapering will be.” said Rabobank economist Philip Marey.
“If he (Bernanke) seems more or less satisfied with how things are going then that would be taken as an indication that we are going to see something in September.”
Benchmark German government bond yields tracked a tick-up in U.S. Treasuries overnight, while euro zone periphery debt, with the exception of Greece, made minor gains. <GVD/EUR>
In Asian trading, Japan’s Nikkei .N225 added 0.64 percent after Citigroup’s strong earnings had helped the S&P 500 .SPX end higher for an eighth day.
Further south, the Australian dollar surged half a U.S. cent after minutes from this month’s Reserve Bank of Australia meeting gave little hint of a near-term rate cut.
Commodity markets were mixed after Chinese data on Monday.
(Reporting by Marc Jones; Editing by John Stonestreet)
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
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Shares, euro steady ahead of data, Bernanke
Sunday, June 30, 2013
VIDEO: European Union Latest News: Croatia Celebrates Its EU Membership
Croatia celebrates its EU membership. Latvia wins EU backing to adopt euro. EU strikes 2 major deals, stumbles on unemployment
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VIDEO: European Union Latest News: Croatia Celebrates Its EU Membership
Saturday, June 29, 2013
VIDEO: Latest Business News: ECB "looking Carefully" at Forward Guidance: Report
ECB ‘looking carefully’ at forward guidance: report. France to seek 14 billion euros in cuts next year. German finance minister slams Irish bankers as ‘aloof super humans’
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VIDEO: Latest Business News: ECB "looking Carefully" at Forward Guidance: Report
Thursday, May 30, 2013
Wall Street, euro zone shares rise, dollar weaker
1 of 8. A visitor looks at his mobile phone in front of monitors displaying market indices at the Tokyo Stock Exchange in Tokyo July 13, 2012.
Credit: Reuters/Toru Hanai
TOKYO |
TOKYO (Reuters) – Asian shares and the dollar were pressured on Thursday, undermined by an overnight pullback in global equities as investors assessed the implications of a potential softening of the Federal Reserve’s massive monetary stimulus program.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.2 percent, barely above Friday’s five-week low of 464.99.
Sentiment was weighed as the CBOE Volatility index .VIX, which measures expected volatility in the Standard & Poor’s 500 index .SPX over the next 30 days, hit a five-week high on Wednesday before closing up 2.4 percent.
The dollar also remained broadly pressured, as Wall Street retreated on fears that strength in the U.S. economy could lead the Fed to scale down its aggressive supportive measures, and as U.S. Treasury yields eased from multi-month highs on Wednesday.
“Speculation about the Fed may be affecting markets in Asia which have been rallying on funds flowing in as a result of the Fed’s stimulus,” said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
“But such speculation about the Fed scaling down its stimulus has been surfacing since the start of the year, and investors may eventually shift their focus to the region’s moderate growth which will likely improve corporate earnings prospects, after the current adjustment phase is over,” he said.
Australian shares .AXJO shed 1 percent to a six-week low as financials lost ground while weak metals prices hit miners. South Korean shares .KS11 were up 0.3 percent and Hong Kong shares .HSI added 0.1 percent, however.
The Nikkei stock average .N225 fell more than 3 percent to below 14,000, dragged lower by the dollar’s decline to its lowest since May 10 against the yen which weighed on exporters.
“The rising yen is just a minor reason that triggered further selling. The fundamental concern that’s been in investors’ heads is the possibility that the Fed is exiting from quantitative easing,” said a fund manager at a U.S. hedge fund.
The dollar fell to a session low of 100.585 yen early in Asia on Thursday before recovering to edge up 0.2 percent at 101.28 yen.
The dollar index .DXY measured against a basket of six key currencies inched down 0.12 percent to 83.561, moving away from its highest since July 2010 of 84.498 reached on May 23.
Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo, pointed to a sense of uneasiness when both U.S. equities and Treasury yields jumped earlier this week, which suggested stocks were due for a correction, as views of a potential shift in Fed policy as the U.S. economy recovers justified a rise in yields more than in equities.
“The dollar is undergoing adjustments as other markets sort out this strange situation. But the U.S. economy is resilient, and if U.S. yields are rising as a result of positive growth outlook, then equities will eventually stabilize. In a broader scope, there is no change in a trend for dollar buying and selling of the yen and the Swiss francs,” Maeba said.
The dollar may be capped around 101.50 yen during Asian business hours on Thursday, but a drop below 101 yen would offer good dip-buying opportunities, he said, adding that the dollar’s limited drop of about three yen during last week’s extreme volatility in Japanese government bond and stock markets underscored the U.S. currency’s long-term bullish outlook.
Benchmark U.S. 10-year Treasury yields eased to 2.12 percent on Wednesday, having reached a 13-month high of 2.24 percent earlier this week.
Treasury yields have come under pressure after Fed Chairman Ben Bernanke said last week that the U.S. central bank may decide to taper its program of buying Treasuries and mortgage-backed securities in the next few Fed policy meetings if data shows economic growth is gaining traction.
Investors will keep a close eye on upcoming data including the week’s jobless claims number and first-quarter gross domestic product due later in the session.
The Organisation for Economic Cooperation and Development on Wednesday cut its global growth forecasts, saying the recession-hit euro zone will fall further behind a generally improving United States and a rebounding Japan this year.
Japan’s capital flows data on Thursday showed foreign investors remained net buyers of Japanese stocks for the week ending on May 25 while Japanese investors sold a net 1.117 trillion yen of foreign bonds in the same period.
Demand worries continued to weigh on commodities.
U.S. crude futures recovered earlier losses to inch up 0.1 percent to $ 93.19 a barrel while Brent was little changed at $ 102.42.
A weak dollar underpinned spot gold, which rose 0.3 percent to $ 1,396.71 an ounce.
(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Eric Meijer)
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Wall Street, euro zone shares rise, dollar weaker
Sunday, May 26, 2013
Kion, Shandong Heavy get 500 million euro to enhance cooperation
Published May 26, 2013
Reuters
FRANKFURT – Germany’s Kion Group , the world’s second biggest maker of fork lift trucks, and shareholder Shandong Heavy <000338.SZ> are getting as much as 500 million euros ($ 647 million) in financing from the China Development Bank to support their cooperation, Kion said.
The two companies will also be receiving unspecified financial services from the bank as part of an agreement signed on Sunday at a meeting between Chinese Premier Li Keqiang and German Chancellor Angela Merkel, Kion said.
“The three parties agreed that Weichai Power and Kion will intensify their cooperation … and that China Development Bank will provide a full range of financial services including financing of up to 500 million euros to support the expanded collaboration,” Kion said.
Kion and Weichai Power were not immediately available to give more details.
The German company, together with its owners Goldman Sachs , buyout firm KKR and 25-percent shareholder Shandong Heavy, is monitoring the market for a potential share sale, Kion Chief Executive Gordon Riske said, German paper Frankfurter Allgemeine Zeitung reported on Saturday.
Shandong bought its stake in Kion Group for 467 million euros in 2012, in what was the largest direct investment by a Chinese company in a German firm.
(Reporting by Peter Dinkloh; Editing by Marguerita Choy)
Kion, Shandong Heavy get 500 million euro to enhance cooperation
Sunday, May 5, 2013
German Finance Minister Who Launched Euro, Calls For Euro"s Breakup
Back in December we pointed out the patently obvious: in the absence of an external rebalancing mechanism, i.e., a free-floating currency, the only option for the bulk of the periphery to regain competitiveness was through ongoing wage collapse and persistent localized depression. Five months later, just as predicted, Europe is in a worse shape than ever before, not only in those non-core countries where wage deflation is accelerating, but the weakness has fully spilled over to the core. Of course, none of this is rocket science, and has been quite obvious to anyone who thought for more than 15 seconds about the “future” of the Eurozone. What is surprising, however, is that with every passing day even the most staunchest supporters of the euro, in this case Oskar Lafontaine, German finance minister in 1998-1999, under whose supervision the euro was launched, are becoming the most vocal Euro-skeptics an unsound, political (capital) currency can no longer buy. Here is the Telegraph’s Ambrose Evans-Prithard dissecting the conversion of the latest europhile turned euroskeptic.
From The Telegraph
Oskar Lafontaine, the German finance minister who launched the euro, has called for a break-up of the single currency to let southern Europe recover, warning that the current course is “leading to disaster”.
“The economic situation is worsening from month to month, and unemployment has reached a level that puts democratic structures ever more in doubt,” he said.
“The Germans have not yet realised that southern Europe, including France, will be forced by their current misery to fight back against German hegemony sooner or later,” he said, blaming much of the crisis on Germany’s wage squeeze to gain export share.
Mr Lafontaine said on the parliamentary website of Germany’s Left Party that Chancellor Angela Merkel will “awake from her self-righteous slumber” once the countries in trouble unite to force a change in crisis policy at Germany’s expense.
His prediction appeared confirmed as French finance minister Pierre Moscovici yesterday proclaimed the end of austerity and a triumph of French policy, risking further damage to the tattered relations between Paris and Berlin.
“Austerity is finished. This is a decisive turn in the history of the EU project since the euro,” he told French TV. “We’re seeing the end of austerity dogma. It’s a victory of the French point of view.”
Mr Moscovici’s comments follow a deal with Brussels to give France and Spain two extra years to meet a deficit target of 3pc of GDP. The triumphalist tone may enrage hard-liners in Berlin and confirm fears that concessions will lead to a slippery slope towards fiscal chaos.German Vice-Chancellor Philipp Rösler lashed out at the European Commission over the weekend, calling it “irresponsible” for undermining the belt-tightening agenda.
Naturally, one wonders just how much of an ethical right to being disgruntled Germany has when the man who was more personally responsible for ushering in the Euro than anyone, Lafontaine’s boss, Helmut Kohl recently admitted in an interview that he acted like a dictator to bring in the euro. “I knew that I could never win a referendum in Germany,” he said. “We would have lost a referendum on the introduction of the euro. That’s quite clear. I would have lost and by seven to three.”
The interview was conducted by Jens Peter Paul, a German journalist in 2002, the year when the Deutsche Mark was replaced by euro notes and coins, but has only been published now.
In it, Mr Kohl describes adopting the euro as an emblem of the European project, which he said had prevented war on the continent. Born in 1930, Mr Kohl’s politics were shaped by his country’s history in the 1930s and 1940s; his final years in power were focused on promoting European unity.
In the interview, he said: “If a Chancellor is trying to push something through, he must be a man of power. And if he’s smart, he knows when the time is ripe. In one case – the euro – I was like a dictator … The euro is a synonym for Europe. Europe, for the first time, has no more war.”
So, in reality, it is neither Germany, nor France, nor Spain, nor Greece, but the Germans, the French, the Spanish and the Greeks , whose majority voice has been usurped by Europe’s conversion to a dictatorial regime, and who have been the most disdavantaged by said usurpation of democracy all in the name of a technocratic, banker ideal, i.e., the EUR, which serves merely to promote the interests of the few, the uber-wealthy, and leave a trail of 60% youth unemployment everywhere in its place, now that the illusion is over and the great unwind toward reality has begun.
That said, expect Lafontaine’s words to be soundly ignored, until such time as avoiding reality and kicking the can is no longer an option. Then again, that is a problem also for the US and its preoccupation with the pyramid scheme known as the stock market and the entitlement system. We expect the grand reset to impact everything at the same time. Until then, it is best to stick one’s head in the sand of course.
Add here is the full statement by Lafontaine.
Chancellor Angela Merkel’s European policy is increasingly under pressure. Not only Euro-pean Commission President Manuel Barroso, but also Enrico Letta, recently mandated by Italian President Giorgio Napolitano to form the new governnnent, have criticized her austerity policies, which have been dominant in Europe and are leading to disaster. Europe’s leaders have long been at a loss. The economic situation is worsening from month to month, and unemployment has reached a level which is increasingly undermining democratic structures.
The Germans have not yet realized that the southern Europeans, including France, will in view of the current economic misery be forced to fight back against German hegemony sooner or later. In particular, German wage dumping, which has been an infringement on the treaties from the outset of the currency union, is putting them under pressure. Merkel will wake up from her self-righteous slumber when the countries which are suffering from Ger- man wage dumping get together to force a policy switch against the crisis at the cost of Ger- man exports.
A common currency could have been sustainable if the participants had agreed on coordinated productivity-oriented wage policy. During the nineties, since I considered such a co-ordination of wages to be possible, I agreed to the establishment of the Euro. But the institutions established for that coordination, particularly the Macro-Economic Dialogue, have been circumvented by the governments. Hopes that the establishment of the euro would force rational economic behaviour on all sides, were in vain. Today, the system is out of joint.
As Hans-Werner Sinn recently wrote in the Handelsblatt, countries like Greece, Portugal or Spain would have to become 20 to 30 per cent cheaper than the EU average, in order to achieve a roughly balanced level of competitiveness, and Germany would have to become 20 per cent more expensive.
However, recent years have shown that such a policy has no chance of being implemented. A real appreciation through rising wages, which would be necessary in the case of Germany, is not possible with the German corporate associations and the neo-liberal block of parties, consisting of the CDU/CSU, the SPD, the FDP, and the Greens, which obey to them. A real depreciation through shrinking wages, which will make income losses of 20 to 30 per cent necessary in southern Europe — even in France — will lead to disaster, as we can already see in Spain, Greece and Portugal.
If real appreciations and depreciations are not possible in this way, it will be necessary to abandon the common currency and return to a system which allows for appreciations and depreciations, as was the case with the forerunner of the common currency, the European Monetary System (EMS). Basically, the point is to make possible once again controlled depreciations and appreciations through an exchange-rate regime run by the LU. For that pur¬pose, strict capital controls would be the inevitable first step, in order to regulate capital flows. After all, Europe has already taken this first step in Cyprus.
During a transition period, it will be necessary to provide aid to those countries which are certain to depreciate their currencies, in order to prop them up — including aid through intervention by the ECB, to prevent a collapse. A pre-condition for the functioning of a European monetary system would be a reform of the financial sector and its strict regulation, along the lines of the public savings banks. The casino has to be closed down.
The transition to a system allowing for controlled appreciations and depreciations should be gradual. A start could have been made in Greece and Cyprus. The experience with the European currency snake and the EMS should be considered.
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Sunday, March 24, 2013
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