Dr Jan Fidrmuc, Department of Economics and Finance and Centre for Economic Development and Institutions, Brunel University
Anti-austerity protestors take to the streets in central Athens earlier this year. Getty Images
Following the rejection of EU imposed austerity measures by the overwhelming majority of Greek voters, eurozone finance ministers have once again come to Brussels to try and save the single currency in what is being described as a ‘crucial 48 hours’.
Two thirds of the Greek electorate voted for parties opposed to the austerity measures required by the European Commission, ECB and IMF as a precondition of a further bailout; despite the outgoing government pledging to adhere to these measures.
Without compromise either by the Greeks accepting austerity measures or the EU offering concessions on the proposed package, another election is inevitable. In this case the bailout package will be suspended, Greece will default on its debt and an exit from the eurozone may follow. None of this will offer much respite for the struggling Greek economy.
In the past the EU offered concessions to voters having rejected EU treaties, however this time there is little political will, and not only in Germany, to offer sweeteners to the Greeks to help them swallow the bitter pill of fiscal adjustment.
Why then are the Greeks fighting against the support from the EU? And should the rest of the EU let them resist or should they be offered a sweeter deal after all? Read more
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The world economy is showing scattered signs of vigor but remains on life support, mostly provided by accommodative central banks. Concerns about spillover from a worsening of the European debt crisis and slowing growth in key emerging markets are putting a damper on consumer and business confidence. Equity markets are pulling back from a robust performance in the first quarter of this year as the sobering reality of a continued anemic recovery weakens investors’ optimism.
There are some positive signs in the latest update of the Brookings Institution-FT Tracking Indices for the Global Economic Recovery (TIGER), but also much to worry about as the world economy continues to meander with no clear sense of direction. Read more
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Despite a number of recent shocks, the global economic recovery is getting on to a firmer footing.
The latest update of the Brookings Institution-FT Tracking Indices for the Global Economic Recovery (TIGER) indicates that resurgent job growth and rising business and consumer confidence are solidifying the recoveries in many advanced economies. Emerging markets are still doing well but some of the shine is coming off these economies as they tighten policies to cope with inflationary pressures.
The Overall Growth Index for the G20 economies shows a slight uptick in recent months, led by a gradual rebound in real activity. After the initial post-recession surge, financial markets have pulled back a bit, at least in terms of growth in stock market indexes and valuations. One bright spot is the resurgent business and consumer confidence in both advanced and emerging economies. Read more
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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