“The effort to bind states together may lead, instead, to a huge increase in frictions among them. If so, the event would meet the classical definition of tragedy: hubris (arrogance); Ate (folly); nemesis (destruction).” Thus, in December 1991, did I conclude an article on the rush to monetary union. I am aware of the commitment of Europe’s elite to the success of the European project. But the crisis is profound – for the eurozone, the European Union and the world. As Wolfgang Münchau has pointed out, last week’s European Council was not a solution but a fudge.
Continue reading “Why Germany cannot be a model for the eurozone”. Please leave your comments in the box at the end of Martin Wolf’s column. Read more
By Peter Bofinger
The “too big to fail” problem, one of the most negative consequences of the financial crisis, has become more severe than ever. Governments all over the world, with their comprehensive rescue packages for aiding banks, have strengthened their implicit commitment to save financial institutions and their lenders at any price. Therefore, for investors it is becoming less necessary to distinguish between banks of different quality. One simply invests money at the bank which offers the highest interest rate. Read more
By Alistair Milne
Debt is a drug. High levels of debt used for unproductive purposes result in a temporary economic high. But after the high there is the inescapable low. Who should pay the bill when it eventually comes due? Should it be the debt user, for eagerly borrowing more than they can comfortably repay? Should it be the debt provider, for knowingly supplying more debt than they can reasonably expect to be paid back? Or should others rally round to help reduce the burden?
The struggle by Greece to repair its public finances is a big challenge to the European single currency. But the underlying question is no different from other previous debt crises, such as Imperial Spain in the 16th and 17th century, Latin America in the 1980s or most recently in US subprime mortgage lending. Who pays? Read more
Since the election of May 1979, just under 31 years ago, the UK has had one change of power, in 1997, and two dominant politicians: Margaret Thatcher, prime minister from 1979 to 1990, and Tony Blair, prime minister from 1997 to 2007. The era that these charismatic politicians defined is now over. That is the biggest lesson to draw from the Budget delivered by Alistair Darling, chancellor of the exchequer.
Continue reading “‘Back to the future’ imperils Britain”. Please leave your comments in the box at the end of Martin Wolf’s column. Read more
Germany says “nein”. That is the most important conclusion to be drawn from the debate on eurozone economic policy. What the German government is saying is that the eurozone must become a greater Germany. But this policy would have profoundly negative implications for the world economy.
Continue reading “Excessive virtue can be a vice for the world economy”. Please leave your comments in the box at the end of Martin Wolf’s column. Read more
By Ronald I. McKinnon
Speculation is rife about when, not just if, China should exit from its policy of stabilising the renminbi/dollar rate. The Financial Times editorial policy more generally, and Martin Wolf in particular have joined the usual ranks of American protectionists in bashing China for failing to appreciate. Read more
By Niels Thygesen
As financial markets and the public debate focus on very rapid debt accumulation by European governments, and by Greece in particular, many people have looked again at the unique construction of Europe’s Economic and Monetary Union. Read more
“Chermany” spoke last week and the world listened. Was what it said coherent? No. Was what it said self-righteous? Very much so. Was what it said dangerous? Yes. Will wiser views still prevail? I doubt it.
Continue reading “China and Germany unite to impose global deflation”. Please post comments below. Read more
By Paul De Grauwe
The crisis that started in Greece culminated into a crisis of the eurozone as a whole. It may find a temporary resolution. But even then, it will leave an important imprint on macroeconomic management within the eurozone. Read more
Mirror, mirror, on the wall who is the least ugly of them all? This is how I feel when I examine the alternatives offered by the forthcoming general election.
Continue reading “The British election that both sides deserve to lose”. Please post comments below. Read more