What the Barnier appointment really means

By: Wolfgang Münchau

The EU missed a unique opportunity to merge economics and finance.

Globalisation - a primer about the European Debate

Globalisation is the probably the single biggest issue that hit the European Union in this decade. A present but ill-defined fear of globalisation was one of the main reported reasons why the French electorate rejected the European constitutional treaty in 2005. There is a sense in Europe that globalisation is a force that will end up impoverish the continent, that it will destroy its values, and its way of life. It is unlikely that European integration will continue further unless and until the Europeans come to terms with globalisation, and devise a strategy.

Towards a Bailout

Newspapers have conflicting stories about whether a Greek rescue package is imminent; a German paper reports that Germany has now excluded the bilateral aid option; another paper says Germany wants Papademos as head of the EU’s oversight office in Athens; Juncker is quoted as saying that he is working towards a solution that would satisfy financial markets; Greek trade unions plan a general strike for Feb 24; Greek bond yields have their sharpest drop since 1998 in anticipation of a deal; economists warn that financial markets might test any agreement reached today; most of Greek debt is held by banks in France, Switzerland and Germany; Frankfurter Allgemeine has a strong editorial, calling on the German government not to support Greece, or otherwise risk German disillusionment with the euro; Martin Wolf says core problem of the euro area is not fiscal profligacy, but lack of demand in Germany; Niall Ferguson, meanwhile, says Greek problems will soon spread to the US.

Now we help, now we don’t –

Germany caused confusion about whether the EU has reached an agreement on how to bailout Greece or not; there seem to be an agreement at a technical level but not yet a political deal; Eurozone firm in finding its own solution; Greece could cheat on deficit statistics using currency swaps with fictive exchange rates; Herman Van Rompuy calls a common evaluation of the Lisbon strategy and the Stability Pact; Wolfgang Munchau urges the summit to set up rules for crisis management; Paul Krugman argues that eurozone needs full labour and fiscal union, otherwise it will fail; Dominique Moisi, meanwhile, explains why the French seem depressed though the economy is doing relatively well.

Markets attacks euro, Portugal and Spain

Investors bet €7.6bn against euro, the highest ever short position on any currency; CDS spreads on sovereign bonds continue to rise for Greece, Portugal and Spain; Jose Zapatero under pressure to demonstrate leadership; A Spanish PR campaign to smooth the markets backfired; Marco Annunziata says eurozone needs institutional overhaul to deal with internal imbalances and moral hazard; Michael Arghyrou and John Tsoukalas propose a two-currency regime as a way out of the crisis; Spanish government blames economic commentators for speculative attack; ECB says private financial institutions should contribute to crisis resolution; A French trade union warned the government not to use the speculative attacks as excuse for austerity measures; Das Kapital argues that such an attack could also happen to the US.

Europeans want to tough it out

Europeans want Greece to help themselves without external aid – for now; Wolfgang Munchau argues why the EU should not let the IMF bail out Greece; Deutsche Bank warns that the speculative attacks on Greece and Spain are a dress rehearsal for the US; G7 fails to agree on prop trading regulation; Euro continues to fall against dollar and yen; Jean Quatremer says one investment bank and two hedge funds are behind the most recent price movements in sourthern European bonds; Jose Luis Zapatero is losing public support; Germany’s manufacturing recovery seemed to have stalled in the last quarter; Paul Krugman, meanwhile, says the euro area is one monetary union too far.

Markets are starting to bet on Euro area disintegration

Plunging stock markets all over the world, particularly in Southern Europe; the euro fell below $1.38; Investors concerned about a string of potential state insolvencies in euro area; The Spanish finance minister critisises the Commissioner Joaquin Almunia for equating Greece, Portugal and Spain; Strikes in Greece is widening; Jean Claude Juncker in denial of eurozone crisis; Peter Bofinger said that the EU can shoulder a default of a small member state; Gillian Tett argues that the current crisis is related to the ECB’s exit strategy; the Economist discusses EU crisis management options; Germany’s stability programme is short on details; Dominique Strauss Kahn, meanwhile, said he might consider running for French presidency.