The end of muddling through is nigh

By: Wolfgang Münchau

One of the aggravating problems in this crisis is the financial illiteracy of Europe's political classes.

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.

Belgium’s deputy PM says prepare for the end of Belgium as new political crisis looms

King Albert accepts resignation of Elio di Rupo as mediator; hopes of a formation of a new government fail, as francophones are now contemplating the end of Belgium as they know it; in Germany, European finance ministers are under pressure to find common position on IMF representation; Thilo Sarrazin threatens legal action; polls show wide support for his far-right views; President Wulff is under attack, and now seeks to hide behind the government’s legal service; Edward Hugh says there are signs that the Spanish economy might fall back into recession; European governments are set to return to the bond markets in a big way this month, as solvency is becoming a big issue among investors; Irish government supports 10-year wind-down plan for Anglo-Irish bank; Spanish banks are also beginning to tap the capital markets; Wolfgang Munchau, meanwhile, says that concerns about peripheral European solvency are for real.

Fiscal Discipline Alone is not Enough

By: Adam Posen

The reform of euro area economic governance will ultimately have to include greater systemic fiscal transfers and stabilization, not just increased budget discipline. The anger over Greek deception and the fear of a sovereign debt crisis may make fiscal discipline prominent among some euro area decision-makers. But such one-sided reform will have costs that will become even more evident in the next couple of years. It also ignores a key source of the current crisis, the lack of sufficient counter-cyclical stabilization within the euro’s monetary union.

A new breed of fiscal watchdogs

By: Lars Calmfors, George Kopits, and Coen Teulings

Faced with a looming debt sustainability problem, EU member governments have been left to their own devices. Both inside and outside the euro area, they are weighing well-known options for reforming entitlement programs and the tax system, to be complemented with the introduction of a new breed of independent fiscal institutions at the national level. Inspired by the experience of the US Congressional Budget Office (CBO) and the Netherlands’ Central Planning Bureau (CPB), in recent years, Belgium, Canada, Sweden, Hungary, and Slovenia have adopted similar institutions, in some cases under the aegis of a council of fiscal experts.

Merkel's expensive dirty weekend

By: Wolfgang Munchau

It was all a big bluff, a giant political miscalculation, costing the eurozone a cool €750bn.

When financial markets force too much austerity

By: Paul De Grauwe

This time financial markets do exactly the opposite of what they did prior to the eruption of the crisis. They now judge an increasing number of government bonds to be highly risky, leading investors to sell these bonds and precipitating a debt crisis in the Eurozone. But if financial markets and rating agencies were so spectacularly wrong prior to the crisis, when they underestimated risks, why would they be right now?