Markets are losing confidence in the European Union’s ability to keep the single currency intact. They are also demanding higher returns to hold the debt of Greece and Ireland today than when they were bailed out by the EU last year. As finance ministers gathered in Brussels this week, they hardly even pretended to agree on how to deal with the endless problems of the euro zone.
A growing number of economists think restructuring now would be cheaper for Europe as a whole than giving more loans that may never be repaid. But politicians, particularly those facing elections in the coming years, will hope they can choose delay.
Tomorrow and tomorrow
ReplyDeleteThe euro zone’s finance ministers continue to act as if time is on their side
http://www.economist.com/node/18713850
Markets are losing confidence in the European Union’s ability to keep the single currency intact. They are also demanding higher returns to hold the debt of Greece and Ireland today than when they were bailed out by the EU last year. As finance ministers gathered in Brussels this week, they hardly even pretended to agree on how to deal with the endless problems of the euro zone.
ReplyDeleteFor all that, they managed to break two taboos. The first is that you must always be polite to Greece. The ministers told their Greek colleague, George Papaconstantinou, that his reform programmes were badly off course. Greece’s promise to sell €50 billion ($71 billion) worth of state assets had not raised a single euro, they complained. Greece was told, bluntly and publicly, immediately to embark on a radical programme of privatisation. Ministers seemed to have taken to heart last year’s headline in Germany’s biggest tabloid, Bild: “Sell your islands, you bankrupt Greeks—and the Acropolis too!”
The second broken taboo is the notion that there can be no restructuring of government debt. Ministers are now talking openly about it, albeit in a “soft” form involving creditors voluntarily stretching out the maturities on their loans to Greece, rather than imposing losses on creditors. The European Commission and, particularly, the European Central Bank had been opposed even to this, for fear of unleashing financial chaos. Yet by the time the ministers emerged, after midnight, from their meeting, Jean-Claude Juncker, head of the euro group, confirmed that a soft restructuring was a prospect. He was backed by the commission, but leading ECB members were highly critical.
Politicians are starting to realise what the markets sniffed out long ago: on its current course Greece will not be able to pay its debts. Yet the European Commission and the ECB continue to argue that a big privatisation programme, more austerity and reforms, and another dose of EU help could see Greece through its problems. The trouble is, economic arguments ignore political realities. Such a plan would force Greece to endure prolonged pain to a degree that strains the imagination.
Among other things, the crisis has underscored the intertwining of public and private debt in Europe. Saving bust banks pushes losses on to states’ balance sheets. Saving the states now risks pushing losses back on to the banks. But nobody knows how enfeebled the system really is. Some answers may emerge next month, after a second, supposedly more rigorous, round of “stress tests” for banks.
It is striking, though, that the scenarios for the tests do not fully include the outcome the markets are most concerned about: restructuring sovereign debt. Officials at the Bundesbank reckon Germany’s banking and insurance systems can survive even a “hard” restructuring by Greece, Ireland and Portugal combined. Brave talk, but German ministers do not seem ready to test their officials’ confidence.
A growing number of economists think restructuring now would be cheaper for Europe as a whole than giving more loans that may never be repaid. But politicians, particularly those facing elections in the coming years, will hope they can choose delay.
everywhere time is running short.
ReplyDeleteduty, responsibility, human rights, freedom
school conferences
grades, testings, community services, internships, school involvement, activities
rebellion teenage...
plus the nightmares as a babysitter again, help mother with 2 toddlers to catch the last train, many others are also running, the train is coming, this is vast of open field, So I start to ran diagonal in short cut. pull out the girl from a group try to hold her up. We catch the moving train, the coach has no wall, just a single bed. total only a few, we only hold 2 coaches enough for their family, I tested beds safety comfort for kids, and put them on, and I was left behind, the mother didn't ask me to go along with them. feeling sad watch the train leaving and wake up.