A framework to assess European policy decisions

According to the market, the short-term default of Greece is a near certainty, with 3 years yield around 24%. Indeed, debt serviceĀ is estimatedĀ to reach 25% of the budget revenues by 2013, which is extremely hard to bear.

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Greece is unlikely to leave the eurozone

Since the Der Spiegel article “revealing” that Greece was considering to leave the EMU, there has been a lot of speculation on whether this should be taken seriously. Markets clearly got scared, as the EUR/USD lost around 3 % after the rumour spread. Read more of this post

Is the Euro-zone headed for a break up ? (3/3) – Solutions

 

Solutions that are unlikely to work

The bailouts did not solve any of the issues of the euro-zone. The divergences in productivity, growth, current account deficits and inflation trends are still there and without tackling with them there can be no long term survival of the euro. Some solutions often touted are unlikely to solve those structural issues, either because they are politically unacceptable, or because they attempt to prevent the next crisis rather than to tackle with the problem at hand.

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Is the Euro-zone headed for a break up ? (2/3) – Fundamentals

The EMU has brought enough positives to be defended

The Euro has by no means been a disaster. It has met its main goal of price stability, did help to get lower interest rates and probably helped growth by helping capital flows. Had it not existed, the European Union would in the past two years have been convulsed by a more extreme version of the currency instability that rocked it in the early 1990s. The single market would have been under serious threat.

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Is the Euro-zone headed for a break up ? (1/3)

Since late 2009, it has become fashionable for pundits and financial commentators to argue that the euro is headed for a breakup – partial or total. It started to be taken seriously when one of founding fathers of the euro (Otmar Issing) said in Feb. 2010 that “starting monetary union without having established a political union was putting the cart before the horse.  Now the question is whether monetary union can survive without such a political union.”

How likely is the eurozone to really break-up ? How to analyze european policies’ impact on a potential break-up ?

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