It was an unusual Monday morning on May 10th, 2010 in Frankfurt. During the weekend, the heads of state, the president of the European Commission and the president of the European Central Bank were hastily looking for a solution to the imminent euro crisis, before markets would open on Monday morning. It must have been a stressful morning for the ECB staff in DG Market Operations, because it was the day when the ECB announced that it would buy large amounts of government bonds from troubled Eurozone countries in the framework of the Securities Markets Programme. Continue reading →
For as long as the euro’s architecture remains incomplete, Greeks get to decide whether to pay or not. It’s called sovereignty.
Greece has escalated the European debt crisis, hoping that austerity would be reduced and debt forgiven as we approach the brink. Indeed the downside risks of a Grexit far outweigh any imagined benefits: Creditors would lose all loaned taxpayer money, and reverse the direction of European integration for the first time, precipitating furthercalamities down the road. But for as long as creditors resist deeper integration of theeuro area, with 19 euro members retaining their economic sovereignty, the blackmailing will go on. Not following the rules is the very essence of economic sovereignty. Greececan free-ride while weighing the costs and benefits of following the rules or not.
The solution to this is not self-defeating austerity, and we hope European leaders willbe too risk-avers to risk Grexident. The answer must be a decisive deepening of the single currency to render the euro sustainable.
Greece did not submit a new reform proposals at the Eurogroup meeting today and it was a wise decision.
Eurozone finance ministers should not decide on something that is no longer a financial/economic matter. There was just an inspired politician among Finance Ministers, but he did not speak the same language of the others and he is no longer there. Finance Ministers have been speaking out too much when they should have probably kept silent and let politicians and prime ministers take the lead and the responsibility that comes with it.Continue reading →
The European Union has been founded on a set of values: “respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities”. Those values are not only common to the Member States but are also considered to be “universal”, meaning that they should be applied to all human beings. As Europeans, we would interpret that as the willingness to promote and apply those values to all human societies in the world. Unfortunately, when it comes to money and power, European decision makers are not even able to apply such values at the European level. In that context, how can they pretend that our model of society is universal if we are not even able to apply it within our own borders? Continue reading →
It really looks like we are not learning from our mistakes. This whole situation between Greece and its international creditors is becoming ridiculous.
Here, the two points that are striking to me:
We have learnt nothing from economics. How come that current negotiations keep on discussing and putting forward economic provisions that proved to be wrong? (and by wrong here I mean that had pro-cyclical effects, i.e. contributed to recession rather than to growth and prosperity)
We have learnt nothing from politics. How come that we haven’t realized yet how bad it is to continue with externally imposed measures on a country and its population? (and by bad here I mean that it reinforces, gives arguments and vigor to those extremist or Eurosceptic forces which are threatening European integration and are growing in several countries)
I will discuss these two points in more detail and then move on to see whether it is possible to find some points on which there is agreement and propose the establishment of a table on investment for Greece. Continue reading →
As the markets are becoming increasingly convinced that Greece will soon default, here is a bold prediction: Greece will not intentionally default. The word “intentionally” is a hedge against accidental default.
Why do I even entertain the idea that I know better that the markets? The reason is simple. Until three days ago most economists had not considered how a judgment of the Court of Justice would have changed the trade-off between repayment of loans and default. Before I explain the significance of that judgment, we need first to understand the options which are open to a sovereign which contemplates defaulting on its obligations. Continue reading →
I was happy to read Wolfgang Schauble’s recent commentaries on the necessity to create a Eurozone Parliament. I would add, it should possibly be a democratic chamber set up as part of a Eurozone government, possibly less dysfunctional than the EU’s.
The German finance minister is essentially saying is that we need a whole new institutional infrastructure to govern the Eurozone in a) an efficient way and b) a democratic (better, legitimate) way. Continue reading →