A New Bretton Woods

By: Ronald McKinnon

This is the beginning of a discussion series on new currency regimes. Ronald McKinnon argues that the four priorities for reform should be to stabilise exchange rates, reduce large trade imbalances, surpress carry trades, and reduce counterparty risk.

The need for concerted action

By: Jörg Bibow

What is presently dubbed Bretton Woods II is not a sustainable system.

The case against naked CDS

By: Wolfgang Münchau

Credit defaut insurance without ownership of the underlying securities is seriously destabisling.

Is the euro challenging the dollar's role as a global currency?

When the Euro was launched in 1999, there was much speculation among academics and policy makers about whether the euro could challenge, over even overtake, the dollar as an international currency. Toward the end 2006, the euro has indeed become a big international currency, but has so far failed to challenge the dollar’s predominance in the main categories that define it as the world’s premier currency.

Papandreou to outline the mother of all austerity programmes

After criticism from the EU, Greece is preparing to take new measures, likely to be announced by Papandreou today or tomorrow; measures to include higher VAT, special duties, and cuts in civil servants’ pay; Germany says aid will be conditional on new measures being judged sufficient; Jean-Pierre Jouyet and Jean-Claude Juncker consider a ban on naked CDS; Germany’s bank supervisor is conducting an investigation into the use of CDS during the Greek crisis; Gillian Tett and colleagues in the FT make the case against banning CDS; Patrick Artus says helping Greece is in Germany’s best interest; Frankfurter Allgemeine suspects a European plot to wrest economic power away from Germany; Poul Nyrup Rasmussen presents his anti-crisis plan for the euro area, focusing on a strategic crisis fund at the EIB; Willem Buiter, meanwhile, says Britain, like Greece, is an economic basket case.

Germany leans against giving aid to Greece

The German position on Greek aid is hardening, as Merkel firmly denies reports that the government has already drawn up plans; Greece is pleading with Germany for aid, as it is subject to speculative attack; Paul Kirchhof, a former German constitutional justice, argues that Greek aid is unconstitutional, and will almost certainly be reject by the Constitution Court, if confronted with a complaint; Greece will announce new emergency measures this week, and will raise money on the bond market; several large hedge funds made huge profits by correctly anticipating the Greek crisis; Wolfgang Munchau argues the case for banning naked CDS; George Soros, meanwhile, says the euro area needs a crisis resolution mechanism, and ideally a common European bond market.

A run on Greece

After Moody’s and S&P warned about further debt downgradings for Greece, the bond markets suffered a collective panic attack. Greek two year bonds are back above 6%, and the euro fell further; Germany banks have announced that they would not be buying any further Greek debt under any circumstances; Greece has threatened to turn to the IMF unilaterally unless the EU provides aid; Jean Quatremer says a monetary union without a fiscal union will not work in the long run; John Authers says that Greece has become the Achilles heel of global financial markets; the Federal Reserve announce it is investigating the role of Goldman Sachs in Greece; Portugal says it will raise €20bn in new debt this year; of the major global regions, the euro area is most likely to suffer a double dip, according to market analysts; Gillian Tett says the reason why Greek bond yields have gone up so sharply is that the market is extremely thin – as most of those bonds are sitting with the ECB by now; Tim Besley and Andrew Scott argue the case for independent financial committees; Jacques Attali, meanwhile, author of the most pointless reform programme of modern times, has been asked to write another one.

Axel Weber hits out at Blanchard

German Bundesbank president says IMF acts carelessly making such a proposal at this time; says debate would create needless uncertainty and put central bank credibility at risk; the Greek economics ministry is planning to announce new austerity measures next week; Standard & Poor’s threatened to downgrade Greece again, fearing a spillover from austerity to economic growth; Greece had a one-day general strike accompanied with violent demonstrations; the Greek crisis double cross Bulgaria’s plans to adopt the euro; Spain is beginning to address the problem of a run-away public sector wage increases; Herman Von Rompuy is beginning to assert himself – inside the Council and vis-a-vis Barroso; Peter Boone and Simon Johnson talk of a doomsday scenario; Martin Wolf, meanwhile, says it is has to avoid a big sovereign debt crisis.

Greek instability now spreading to the private sector

Fitch downgrades four large banks to tripple-B, two notches above junk status, amid signs that public sector austerity may already be spreading to the private sector; Lorenzo Bini-Smaghi says it is possible that Greece needs outside help, but not of the scale as recently reported in Germany; austerity plans spark mass protests in the euro area: Greece is preparing for a 24 hour general strike tomorrow; while there were demonstrations in Spain against pension reform and public spending cuts; severe winter weather triggers first fall in Germany’s Ifo index in a year; Spanish central bank criticises lack of reginal bank consolidation; the Dutch elections will be held on June 9; Paolo Manasse wonders whether the crisis could spill over to Italy; Domingo Cavallo and Joaquin Cottani say Greece needs tax reforms; Richard Baldwin and Charles Wyplosz says that Martin Feldstein is out to destroy the euro area with his crazy proposal; Wolfgang Munchau argues that the euro area may soon reach a point of no return; John Plender, meanwhile, argues that the Greek problem cannot be solved by austerity alone.