The Euro Area's political constraints

By: Wolfgang Münchau

Not all policy solutions are possible in a monetary union. There are severely constitutional constraints.

Why the European Debate on Competitiveness is going nowhere

Raising competitiveness has been the prime goal of economic policy in Europe. But is it a sensible goal? Those who favour a competitiveness-based approach often make false analogies between enterprises and countries. Countries do not compete in the way companies do. Trade among countries is not about profit but about the division of labour. It can benefit all by raising productivity. A more meaningful concept of competitiveness at the national level defines a competitive country as one that can maintain high rates of growth and employment in the medium term. This concept focuses on the country’s ability to provide its citizens with high and rising standards of living in the medium and long...

€55bn for a Greek bailout

Behind the scenes, the EU is working out the technical details for a Greek bailout; Berlin and Paris agree that Greece might need €55bn for bailout; Germany could be ready to contribute €20bn, preferably in forms of guarantees and purchases through KfW; First intervention might happen around Easter; Meanwhile, Germany promotes the EMF as a way to strengthening the stability pact and legalise euro exit; Huge disruptions through strikes against austerity measures in Greece; ECB critisises Spain over lack of concrete proposals to reduce deficit; Spanish banks are getting nervous about the failure to restructure the savings bank sector in Spain; conflicting new about whether the EU might be ready to use qualified majority to overrule British objections against hedge fund regulations; Critics, especially in the UK, say the current proposal is potentially protectionist; The EP has co-decision, and there are 1700 amendments already on the table.

The case for optimism: Three reasons why global GDP growth will accelerate in 2010

By: Eric Chaney

End of 2009 business cycle and market indicators were not as bullish as they were in the first phase of the global recovery, which, tracked by the global trade of manufactured products, started in June. Various signs of a global slowdown have recently appeared in business surveys, from China (PMI) to the US (see our Surprise Gap built from the ISM survey) and Germany (industrial production). Global stock markets have moved sideways since the end of October, as uncertainties about the continuation of the recovery grew. In addition, the announced restructuring of Dubai World’s debt, the downgrade of Greece and the bailout of an Austrian bank have raised the markets’ awareness that, in a still deflationist world, debts do not vanish in thin air, they just move from hands to hands, like hot potatoes.

Towards Default

By: Wolfgang Münchau

The European response to the Greek crisis is at least in part to blame.

Towards Default

By: Wolfgang Münchau

The European response to the Greek crisis is at least in part to blame.

The answer to our problem with China is not revaluation – but Asian monetary cooperation

By: Stefan Collignon

Chinese authorities have rejected demands by Americans and Europeans to appreciate their exchange rate. A common view is that China manipulates its currency to gain unfair trade advantages, although the world benefits from Chinese rapid growth and exchange rate policies. China is therefore right to resist demands for appreciation and Europe is wrong to copy American demands. It needs its own economic foreign strategy.