The Greek crisis and the future of the Eurozone

By: Paul De Grauwe

Sorting out the Greek crisis remains the absolute priority in the short-term.

Greek Competitiveness Is Not the Issue, Fiscal Discipline Is

By: Erik Jones

The simple fact of the matter is that Greece is having a fiscal crisis. It would have had that crisis whether or not it was in the eurozone.

Europe in Dire Straits – don’t be Brothers in Arms.

By: Henrik Enderlein

The case against bailing out Greece.

How should the Eurozone handle Greece?

The political pros and cons for no support, a European rescue and a call for the IMF.

The Euro Area's political constraints

By: Wolfgang Münchau

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

When Does It Hurt?

By: Ansgar Belke

The exchange rate “pain threshold” for German exports is at $1.55 to the euro.

Fiscal policy in Central and Eastern Europe

By: John Lewis

Countercyclical but deteriorating with EU membership.

The problems with the Schäuble proposal

By: Wolfgang Münchau

The real bullet is not the EMF, but the exit clause, which could become a self-fulfilling prophecy.

Eurozone Meltdown

This is the first in a new series of regular briefing notes on important issues facing the euro area. In this briefing note we are asking whether the euro area could ever break up. We think not. But we are not as certain as we used to be.

The deal is done – or is it?

Finance ministers announce that they have agreed on a package for Greece - except that all the details have yet to be worked out; what seems to have been agreed that any aid, should it be necessary, would come in the form of loans, not loan guarantees; ministers pretend that aid will probably not be needed; rating agency S&P expresses concern about the impact of the recession on Spanish banks; German official react furiously at Christine Lagarde’s criticism of Germany’s current current account surplus; Daniel Gros says Greece faces the choice between a long recession or a one-big large internal devalution; Lorenzo Bini-Smaghi comes out in favour of explicit bailout rules.

€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.

Germany and France call on a ban on speculative trading in CDS

Merkel and Fillon reach agreement over CDS; both ask Barroso to launch a full investigation into the role of CDS in sovereign bonds in the EU; FT says Europeans are deflecting from their inability to deal with the Greek debt crisis; Geithner warns EU of a regulatory transatlantic drift if it goes ahead with hedge fund regulation; The French political establishment is neutral to mildly sceptical on the idea of an EMF; Greece is breasting for further strikes today; A majority of Greece fear that the recession will last many years; Luis Garicano says Spain has the potential to avoid the Greek fate, but only if it undertakes serious reforms; credit market valuation, meanwhile, return to their long-term average after the girations of the last few years.

It looks like they might really ban naked CDS

France, Germany and others are pressing for a fast-track resolution to clamp on derivatives trading; Papendreou says Obama is ready to discuss the issue at the next G20 summit; technical differences between France and German remain unresolved; according to one news report, the euro group/Ecofin is to make a declaration in support of an EMF next Monday; Axel Weber opposes the EMF plan as a detraction: it would be better to strengthen the stability pact; Christine Lagarde dismisses the EMF as “interesting” but not a priority issue; Fitch warns that France, UK and Spain may lose their tripple-A rating unless they step up consolidation; Deutsche Bank analysts are questioning whether government bond rates can continue to act as a risk-free benchmark; German conservative commentators are becoming increasingly paranoid and conspiratorial as euro area crisis progresses; Martin Wolf, meanwhile, argues that the only way for the euro area to become more German, is for Germany to become less so.

Sorry, no EMF – can’t be done

Merkel realises that Schauble’s proposals would require a substantial revision of the European Treaties; the plan has now been relegated to the status of a long-term goal; Jürgen Stark says EMF would be a violation of current European law, and would undermine the public’s trust in the euro; FT says in an editorial the plan is too much focus on fiscal policy, and does not take sufficient account of the euro area’s internal imbalances; Giancarlo Corsetti and Harold James make the case for an EMF, but say in the meantime the eurozone will have to make do with the IMF; Austria enact ambitious fiscal consolidation plan; James Hamilton reports about a new financial conditions index, which shows that the US economy is heading for a double-dipper; Rebecca Wilder says the competitive deflation is now the name of the game in the EU; Paul Krugman, meanwhile, says the EU is following in the footsteps of Andrew Mellon.