debating progressive politics in Europe and beyond
The recent[1] ECB Governing Council turned out to be something of an anti-climax. Mario Draghi created huge expectations when he stated one week before that the ECB would do ‘whatever it takes to save the Euro’. It was hoped that the ECB would finally step in from the sidelines and send a strong signal to [...]
Government bond markets in Europe remain volatile, with Spanish and Italian bond rates at near unsustainable levels. Paul De Grauwe argues that the only institution that can stabilize these markets by buying government bonds is the European Central Bank (ECB). The ECB must now overcome its risk averse nature and take advantage of its virtually infinite resources [...]
2011 was supposed to be the make-or-break year for the euro. First it was weeks, then just a matter of days to save the euro. Yet, 2012 has begun and we are still paying our taxes and bills are writing our contracts in euros. Not only here in Brussels, but also in Bologna, Barcelona, Braga [...]
There was a lot of European economic news today. Not all of it was bad. The media and investors are celebrating the success of today’s bond auctions by Spain and Italy, the two most critical countries in Europe’s sovereign debt drama. Bond yields fell and stock markets rose, in Italy by 2.7%. Yet it is [...]
In the aftermath of the most recent European Council, there was an avalanche of public statements which, in effect, put the Council’s policy package into serious doubt. One statement in particular deserves further analysis. In an interview with Frankfurter Allgemeine Sonntagszeitung on the 11th of December, Bundesbank president Jens Weidmann expressed the view that the [...]
While the outcome of the European summit was very disappointing, there was one chink of light: that the agreement, and particularly the fiscal compact, would be used as a cover under which the ECB could abandon its reticence to support distressed sovereign debt markets, which was justified by the ‘moral hazard’ of bailing out allegedly [...]
It seems that, at last, the penny, or rather the euro cent, has dropped. The ECB appears to be willing to intervene in a more substantial way to contain the crisis. It may have decided not to commit suicide after all. Member States, individually and collectively, are, in return, apparently prepared to contemplate the previously [...]
Finally: we are all Greece! OK, not quite. But the news that Germany was unable to sell one third of the new government bonds it sought to auction today is a worrying sign. ‘Investors boycott German government bonds!’ screamed the Handelsblatt headline. Has Germany joined the periphery, too? Has the core melted? What has happened, [...]
It is often claimed that imposing a haircut (i.e. a partial default) on holders of Greek bonds is fair, sets incentives correctly, and avoids moral hazard. Haircut fans on Right and Left use slightly different arguments, but the basic point is the same. If you invest money, you must accept the risk of losses. If [...]
Europe’s leaders and senior officials are today trying to cobble together a last-gasp deal to save the euro. It is possible that they will fail to reach a consensus, in which case the almost certain result would be immediate market panic, renewed pressure on banks, a double-dip recession and, very likely, a disorderly break-up of [...]
Financial markets are driving the world towards another Great Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation. They need to regain control, and they need to do so now. Three bold steps are needed. First, the governments of the eurozone must agree in principle on a new [...]
Former US Treasury Secretary Lawrence Summers had a good line at the International Monetary Fund meetings this year: governments, he said, are trying to treat a broken ankle when the patient is facing organ failure. Summers was criticizing Europe’s focus on the second-order issue of Greece while far graver imbalances – between the EU’s north [...]
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