Antonis Samaras. Getty Images
Leaders have begun arriving at their party caucuses and one of the first to show up at the centre-right EPP gathering was Antonis Samaras, the New Democracy leader locked in a neck-and-neck fight to become Greece‘s next
prime minister. Read more
The euro will survive…for at least another year.
So proclaimed Jean-Claude Juncker, the Luxembourg prime minister and head of the euro group of countries, who announced Monday night that doubters of the currency’s future would be proven wrong in a year’s time. Read more
Ahead of this week’s gathering of European finance ministers in Brussels to hash out new bail-out systems for the eurozone, two magazines have weighed in with their views of what needs to come next to rescue the single currency – and both suggest going further than ministers have been willing to thus far.
On Sunday, the New York Times Magazine published a highly readable summary of the crisis by Nobel Prize-winning economist Paul Krugman entitled “Can Europe be Saved?” in which he appears to back the idea of a Europe-wide bond.
And the new issue of the Economist advocates a different and far more pessimistic route: a restructuring of Greek debt, followed potentially by similar moves in Ireland and Portugal. Read more
The most significant EU-related development over the holidays was Estonia’s official entry into the eurozone on New Year’s Day, an event that is worth revisiting as the single currency prepares for what is likely to be another year of turmoil.
As Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy, notes in a new “Obituary for the Estonian kroon”, it wasn’t too long ago that the Estonian government was being advised to drop its peg to the euro and let its currency float in order to save its economy from the ravages of the European debt crisis.
But Tallinn hung tough, and as we noted in an article last month, is now poised for gross domestic product growth that is the pride of the EU. According to forecasts by Eurostat, its 4.4 per cent 2011 real GDP growth would make it the best performer in the eurozone.
When I talked to Estonian President Toomas Hendrik Ilves last month, he recalled with hard-to-contain smugness the amount of pressure the country resisted to devalue during the early days of the euro crisis. “All three Baltic economies were in serious trouble, and all kinds of people said devalue, devalue, devalue,” he said. Read more
After days of internecine sniping between leaders of the 16 eurozone countries over Ireland’s debt crisis, officials involved in Tuesday night’s marathon meeting of finance ministers from the euro group say that their session was free of the kind of drama that many had feared heading into the summit.
Jyrki Katainen, the Finnish finance minister who is also the chief economic spokesman for the centre-right caucus of European political parties, called the discussion “pragmatic” and said it focused on the Irish banking sector and how any aid would help restructure it in a way that could stop the bleeding. Read more
Reforming the management of economic policy, primarily in the eurozone but also in the European Union as a whole, is without question one of Europe’s highest priorities. Few steps would do more to raise the EU’s credibility with the US, China and the rest of the world than concerted action to improve European economic performance and make the euro area function more efficiently as a unit. Much of this comes under the heading of “economic governance”. But the difficulty is that it is not always easy to figure out which Europeans are in charge of the process.
On Monday Herman Van Rompuy, the EU’s full-time president, chaired the latest meeting of a task force on economic governance that he was chosen last March to lead. The task force, consisting largely of EU finance ministers, came up with various sensible ideas on tightening sanctions (financial and non-financial) on countries that break European fiscal rules. Task force members also want to strengthen the monitoring of macroeconomic imbalances, such as the gap between large current account surpluses in Germany and deficits in southern Europe. Read more
Financial commentators, like financial markets, move in herds. Is the herd wrong about Greece?
The herd takes the view that Greece will sooner or later have to restructure its debt. According to herd thinking, the €110bn rescue plan arranged for Greece by its eurozone partners and the International Monetary Fund merely buys some time for the Greek government – and for its European bank creditors. The herd predicts a “haircut”, or loss, for Greek bondholders of 30 to 50 per cent of the face value of their bonds. All this is likely to happen towards the end of 2011 or in early 2012, says the herd. Read more