ECB

James Mackintosh

When the European Central Bank governing council meets on Thursday in Frankfurt, sushi is unlikely to be on the menu. But officials should have a concern: is the eurozone turning Japanese?

This chart shows headline inflation (in Japan the measure excludes fresh food) for Japan since its bubble turned to bust in 1990, heralding a slide into deflation. Radical action by its central bank is just beginning to return price rises, as the far right hand side shows. Read more

A suggestion by Dutch finance minister Jeroen Dijsselbloem that the Cyprus deal could mean depositors at troubled banks elsewhere in the eurozone also suffering has pushed banks back into bear territory. James Mackintosh, investment editor, warns of the risk of a vicious downward spiral unless Europe and the European Central Bank can reflate peripheral economies.

James Mackintosh

Lee Buchheit is a man worth listening to. The Cleary Gottlieb lawyer wiped €100bn off Greece’s debts when he restructured the country’s bonds at the expense of the private sector, in just the latest in a long line of sovereign defaults he has overseen.

Now he’s airing his thoughts on the options for Spain and Italy, jointly with Mitu Gulati of Duke Law School – and rather bravely, he’s due to speak about it in Portugal next week.

His key message is that Spain is running on borrowed time, and should get on with a Uruguay-style debt reprofiling as soon as possible, extending maturity dates on bonds far into the future but continuing to pay interest. Read more

James Mackintosh

Mario Draghi has promised to do what it takes to save the euro. Markets are doubtful (video) – but the logical conclusion of the European Central Bank boss’s justification for action is that the ECB should be shorting German bondsShort View column here.

John Authers

Does Spain really need to leave the euro? There is a pervasive argument that it does. That would restore its competitiveness, and allow the country to inflate away its debts.

But Xavier Vives, an economist at the IESE business school in Barcelona, suggests otherwise. Spain obviously has some serious problems, but an overvalued currency is not one of them. The charts he presents show that Spain’s share of  global merchandise exports has barely declined during the eurozone era – quite a feat given that even Germany’s share has declined during the rise of China. Meanwhile Spain’s services exports have gained market share quite healthily. Devaluation would help but it is not desperately needed.

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