Thursday, May 31, 2012

Will This Greek Tragedy Climax in the Death of the Euro?

by Douglas J. Elliott

Brookings Institution

May 31, 2012

Greece could well be out of the euro soon, depending on the results of the election scheduled there for June 17. Such an exit could conceivably occur even before the election if enough people take actions to anticipate a euro exit, unintentionally precipitating the event. An exit would inevitably be messy and has the potential to push Europe into a severe recession, the U.S. into at least a modest recession, and to substantially slow the growth of China. The Institute of International Finance has estimated an exit could cost the world economy over $1 trillion and official bodies such as the International Monetary Fund (IMF) have similarly warned of disastrous results.

This paper answers the following questions about a potential euro exit:
  • What is the probability of an exit from the euro?
  • Why might Greece exit?
  • What is the argument about austerity and growth?
  • What is likely to happen in the Greek elections?
  • What will happen after those elections?
  • How might a Greek exit develop?
  • What would the damage be of a Greek exit?
  • Why might other countries exit?
  • What can the euro area do to stop further exits?
Read the Paper

Greece’s political changes put bailout, euro at risk

Washington Post
May 31, 2012

The Greek government is missing key deadlines for making economic reforms that were promised in return for its international bailout, knocking the program off schedule just weeks after it was agreed to and increasing the chances that the country will have to abandon the euro.

A contentious spring election campaign and the divided results of the May 6 vote have left the country with a caretaker government that has no power to take major steps. The measures pledged by Greece, which include cuts to welfare programs and public-sector wages, tax reforms and the drafting of long-term budgets, were due to be completed in May and June.

New elections are scheduled for June 17. But there is no guarantee that they will produce a government willing and able to carry out the steps pledged in return for $170 billion in emergency loans from other European countries and the International Monetary Fund.

The Obama administration is closely watching the situation, worried that a breakdown in Greece’s reform program and its exit from the euro currency union could touch off a wave of financial trouble across Europe and possibly the world. The fear is that if Greece cannot meet its commitments, investors will lose confidence in other struggling countries, such as Spain and Italy, forcing them to seek massive bailouts that would be difficult for Europe and the IMF to afford.

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European dysfunction chart of the day, Greece vs Germany edition

by Felix Salmon

Reuters

May 31, 2012

Mark Dow has found an astonishing set of results from a February opinion poll in Greece; it’s hard to imagine that Greek attitudes to Germany have improved since then. Here’s just one of the 13 slides:


The final question, in particular, renders rather unfunny the joke about the German Chancellor flying to Athens for some meetings, and being stopped at immigration. “Name?” she’s asked. “Angela Merkel.” “Occupation?” “No, I’m just here for a couple of days.”

For his part, Dow seizes on a different question — one which shows that 51% of Greeks attribute Germany’s strong economy to corruption, and only 18% attribute it to competitiveness. Greek public opinion, it seems, is decidedly of the view that the only way Greece can compete with Germany is to become a lot more corrupt.

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Troubled Greece: fears of 'first domino' to fall as austerity is counted a failure

by Larry Elliott

Guardian

May 31, 2012

The soup kitchen opens at noon but long before then the queues start to form in the hot Athens sun. A couple of streets away from where sardines, red mullet and squid are piled high in the fish market, those down on their luck line up. While elsewhere life goes on seemingly as normal, students, jobless people, single parents and pensioners swallow their pride and wait patiently. They get two meals a day, at midday and 5pm. This is what a depression looks like.

At first blush, Greece seems no different from any other developed country. People sit in the city centre cafes sipping their iced coffees; yellow taxis cruise the streets; the shops are open for business. But different it is, and it is not hard to spot the signs that this is an economy that has contracted by 20% since the downturn began three years ago and that it is still falling.

You don't need to know that spending in the shops is down by a sixth over the past year; it is obvious from the empty cabs and those shops open but with no customers. You don't need to know that the official unemployment rate is well above 20% and youth unemployment is nudging 50%: it's obvious from the young men idling on street corners and openly dealing drugs.

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Europe must prepare an emergency plan

by Robert Zoellick

Financial Times

May 31, 2012

Eurozone leaders may be nearing a “break the glass” moment: when one smashes the pane protecting the emergency fire alarm. While those living in the eurozone building, especially those on the executive floors, will not want to hear an alarm, they had best read the instructions. Events in Greece could trigger financial fright in Spain, Italy, and across the eurozone, pushing Europe into a danger zone.

The summer of 2012 offers an eerie echo of 2008. Markets are signalling anxieties about a major asset class. In this round, eurozone sovereign debt has replaced mortgages as the risky investment. Banks are under stress. Depositors have not yet begun to run, but they are starting to jog. The European Central Bank, like the US Federal Reserve in 2008, has sought to reassure markets by providing generous liquidity, but collateral quality is declining as the better pickings on bank balance sheets are used up.

We cannot predict the outcome of the Greek election, nor whether a new Greek government will simply drive a harder bargain for more subsidies, rather than seek to leave the eurozone. Greece’s eurozone partners are frustrated, although they still seem willing to offer considerable aid to avoid a crisis precipitated by a Greek exit from the euro – if Greece’s leaders and public commit to a viable programme.

If Greece leaves the eurozone, the contagion is impossible to predict, just as Lehman had unexpected consequences. A Greek exit would trigger a hit to confidence in other sovereign euro assets. Eurozone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other flames.

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On ‘Greece-Proofing’ China

by Didi Kirsten Tatlow

International Herald Tribune

May 31, 2012

China urgently needs to “Greece-proof” itself to avoid powerful shocks that will undoubtedly come if Greece leaves the euro, a leading Chinese economist says, amid the sound of screeching brakes from an economy that has been looked to for world growth.

In fact, recession in the West will last for years, predicts Yu Yongding, and coupled with a Grexit — as a potential Greek exit from the euro is being called — key challenges for China will be expected waves of deleveraging and investors exiting risky markets, surging unemployment and threats to social stability, he writes.

Mr. Yu has criticism for Europe, writing that “the eurozone, and Germany in particular, must fully acknowledge the fundamental causes of Greece’s exit and pledge to move towards fiscal union, while acknowledging that an austerity-only approach towards other at-risk members is a dead end.”

Mr. Yu’s warning is well-timed. China’s own growth is expected to fall this year to its lowest point in about 13 years, and Mr. Yu, the president of the China Society of World Economics and a former member of the monetary policy committee of the Chinese central bank, the People’s Bank of China, may have a pretty clear idea of what lies ahead. He’s saying: Get ready.

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Reviving Growth in Europe

by Nemat Shafik

International Monetary Fund

Brussels Economic Forum
May 31, 2012

It is a pleasure for me to be here today, and I want to thank the organizers for inviting the IMF to give its perspective on how to revive growth in the European Union.

There is no denying that Europe today is in an extremely difficult situation. The pressure has been relentless for many months now, and it will unfortunately take further efforts to restore confidence in the European Union’s economic future. The topic of today’s conference ―finding new sources of growth―will ultimately determine whether we are successful in that endeavor.

As I was preparing for this speech, I was reminded of Robert Schuman, one of the founders of the European Coal and Steel Community. This month, 62 years ago, he and his fellow politicians issued their call for an integrated Europe, starting the process that paved the way for the European Union we know today.

Schuman’s dream was simple: He wanted an economic union, a sharing of strategic resources in Europe that would “make war not only unthinkable but materially impossible.” At the heart of his vision was the idea that economic growth and shared prosperity would finally bring peace to Europe.

By that measure the project has been a resounding success. The EU has expanded to 27 member states and the economic union has grown ever deeper, including a common market and, for 17 countries, a shared currency.

And yet, today, the crisis afflicting some members of the euro area is threatening to undo those historic achievements. So where do we stand, and what needs to be done? In the next 15-20 minutes, I will look at what we think could be done to support growth in the short term, before turning to reforms that are needed to boost long-term growth and complete the process of European integration.

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Deepening crisis forces Merkel to re-examine euro taboos

Reuters
May 31, 2012

How far is Germany prepared to go to save the euro zone?

With Greece's future in the single currency bloc in doubt, Spain scrambling to get a grip on its ailing banks and the euro itself in freefall, the question that has preoccupied crisis watchers for over two years is back in focus like never before.

As in previous "crunch" moments during the crisis, coming up with a clear picture of Berlin's intentions is difficult.

Chancellor Angela Merkel, who has looked increasingly isolated since the victory of Socialist Francois Hollande in France's presidential vote, is keeping her cards close to her chest in the run-up to a pivotal EU summit one month from now.

Much will depend on the outcome of Greece's June 17 election, where a victory for the radical-left could catapult the bloc into an even deeper abyss, forcing Merkel and her partners to decide whether they can cope with a Greek exit and the contagion that would bring.

But amid the uncertainty, Merkel and her advisers have sent out signals that help to decrypt which of Berlin's "red lines" in fighting the crisis are truly red, and where Europe's reluctant paymaster may show flexibility in the crucial weeks to come.

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Killing the euro-patient? The doctors think the medicine will work, if the euro does not die first

Economist
June 2, 2012

The European Commission this week released its health check of European economies—and the verdict at times seemed surreal. “I can say the medicine is beginning to work,” said José Manuel Barroso, the commission president. Forget alarms over Greece’s imminent departure and wild oscillations in Spanish bond spreads. The good news is that budget deficits are coming down and other imbalances are being redressed. So the doctors prescribe more of the same: austerity, structural reform and a war against tax evasion. But behind the impression of confidence, the commission is rethinking its treatment.

Super-fit Germany has made the adjustment earlier than planned and been released from the “excessive deficit procedure”. Bulgaria was similarly freed, proving that discipline is not just for the strong. They will join Estonia, Finland, Luxembourg and Sweden in the club complying with deficit targets. Hungary, which had incurred disapproval all round, now gets a nod for tackling its deficit: the commission recommended lifting a threat to withhold a chunk of aid.

Senior Eurocrats see this as evidence that the system of economic governance is working. Brussels monitors national budgets and economic policies under the so-called “European semester”, culminating with country-specific recommendations. They comprise some 1,500 pages of analysis, diagnosis and prescription for each of the European Union’s 27 members. If naming and shaming is not enough to push governments into reform, the commission has powers to recommend sanctions, enforceable unless a weighted majority of ministers blocks them.

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Democracy in action: The outcome is still highly uncertain—as is Greece’s future in the euro

Economist
June 2, 2012

Greek voters face a bleak choice on June 17th, in their second general election in six weeks. The sensible options are the centre-right New Democracy (ND) party or the PanHellenic Socialist Movement (Pasok). Both parties promise a future in the euro, though the cost is high: at least three more years of austerity in return for shrinking external help. So angry, jobless Greeks may prefer the alternative: the radical left Syriza coalition, which came second on May 6th and is now hard on ND’s tail. They are tempted by talk of Robin Hood taxes to help the poor and the renationalising of much of the economy.

Opinion polls are volatile and inconsistent. But most show a close contest between ND and Syriza, with Pasok trailing in third. A poll by GPO for Mega, a private television station, gives ND 23.4% to 22.1% for Syriza and 13.5% for Pasok. Efforts by Antonis Samaras, the ND leader, to rally centre-right voters may be paying off. Dora Bakoyannis, a pro-reform former foreign minister, has rejoined him along with members of her liberal splinter group, the Democratic Alliance. Right-wingers from two other small parties are also creeping back. Pasok is having a much tougher time; hardline supporters scared of losing cushy public-sector jobs have fled to Syriza. Evangelos Venizelos, its leader, is fighting to avert an all-out collapse at the polls, say campaign workers.

The mood is gloomy. Few Greeks are confident that a stable government will emerge from the election. Optimists hope ND will win and team up with Pasok and Democratic Left, a small party of ex-Syriza moderates. If Alexis Tsipras, the charismatic Syriza leader, pulls his party into first place, he would have to find coalition partners among the same parties. Mr Tsipras argues that Greece can dump the European Union/IMF bail-out terms, yet keep the euro. If he comes to power, a confrontation with Brussels, which takes the opposite view, would surely follow.

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The fear factor: Preventing a big European bank run

Economist
June 2, 2012

In continental capitals and bank boardrooms there is a common fear. It is that the slow jog of deposits leaving banks in Greece and, more recently, Spain, may turn into a full-blown run that quickly spreads from bank to bank, and then from country to country. There have already been some warning signs, such as a sudden acceleration of deposit outflows from Greek banks in May.

A fierce debate is now taking place as to the best way to avert a run that, if it started, might be difficult to contain and could lead to massive capital flight from the euro zone’s peripheral countries, which have €1.8 trillion ($2.2 trillion) in household deposits (see chart). Increasing numbers of people think the answer is greater financial integration. On May 30th the European Commission said there ought to be “full economic and monetary union, including a banking union; integrated financial supervision and a single deposit guarantee scheme”.

The first step is to shore up confidence in the region’s banks by making sure they have enough capital to withstand a crisis. It is far cheaper to recapitalise banks, after all, than to stand behind all of their deposits. Yet such efforts have been bungled time and again. Europe has twice over the past two years tried to reassure depositors and investors that its banks are sound by subjecting them to “stress tests” that were supposed to mimic an economic downturn. In each case the tests were soon followed by revelations of deep capital holes in some banks (newly nationalised Bankia among them). Since some national regulators have lost the confidence of markets, they are having to bring in outsiders to assess how much capital their banks need.

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Smart Taxes

by Hans Eichel and Yannis Palaiokrassas

Project Syndicate

May 31, 2012

Governments throughout the European Union and around the world confront a seeming Catch-22: the millstone of national debt around their necks has required them to reduce deficits through spending cuts and tax increases. But these are impeding the consumer spending needed to boost economic activity and kick-start growth. As the debate shifts from austerity towards measures aimed at stimulating growth, smarter taxation will be essential to getting the balance right.

When governments think about the difficult task of raising taxes, they usually think about income tax, business taxes, and value-added tax (VAT). But there are other taxes that can raise significant amounts of revenue with a much less negative impact on the economy. These are the taxes that governments already levy on electricity and fossil fuels.

Such taxes play a crucial role in cutting the carbon emissions that cause climate change. But recent research shows that they can also play a useful role in raising government revenue at little cost in terms of economic growth.

Euro for euro, dollar for dollar, yen for yen: energy and carbon taxes have a lower negative impact on a nation’s economy, consumption, and jobs than income tax and VAT. For example, an increase in direct taxes, such as income tax, can reduce consumption by twice as much as energy and carbon taxes that raise the same amount of revenue.

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Debt Crisis Erodes Europe's Banking Ties

Wall Street Journal
May 31, 2012


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H σιωπηλή πλειοψηφία

του Eυάνθη Xατζηβασιλείου

Καθημερινή

31 Μαΐου 2012

Για να συγκαταλέγεται μια κοινωνία στον Πρώτο Kόσμο πρέπει, μεταξύ άλλων, να συντρέχει μια άρρητη, αλλά θεμελιώδης προϋπόθεση. Oτι υπάρχει μια σιωπηλή πλειοψηφία, η οποία είναι μεν χαλαρή, αδρανής ή και σχετικά αδιάφορη, αλλά κινητοποιείται για μια και μόνη ημέρα –την ημέρα των εκλογών– για να δώσει Bουλή και κυβέρνηση, και να καθορίσει την πορεία της χώρας.

Yπάρχει όμως αυτή η σιωπηλή πλειοψηφία σε μια Eλλάδα όπου στις εκλογές σημειώνεται αποχή της τάξης του 35% (φανταστείτε: σχεδόν σαν το 1946, όταν απείχαν οι «άλλοι»...), ενώ στο υπόλοιπο τα ακραία κόμματα λαμβάνουν ένα τεράστιο ποσοστό των ψήφων; Συντρέχουν δηλαδή οι κοινωνικές και πολιτικές προϋποθέσεις ώστε η Eλλάδα να συγκαταλέγεται στον Πρώτο Kόσμο;

Πιστεύω ακράδαντα ότι η Eλλάδα είναι μια κοινωνία του Πρώτου Kόσμου. Oτι υπάρχει η σιωπηλή πλειοψηφία που μπορεί να της δώσει κατεύθυνση. Πρέπει όμως να εκδηλωθεί και να αποφασίσει. Πρέπει να μιλήσει, όχι κατ’ ανάγκην για χάρη ενός κόμματος ή μιας εκδοχής της μεταρρύθμισης –έχουμε φύγει από το σημείο αυτό– αλλά για χάρη ευρύτερων αξιών και προοπτικών. Πρέπει να κινητοποιηθεί για να μείνει ζωντανή, ώστε να πολεμήσει μια άλλη μέρα.

Περισσότερα

The PIIGS May Be Bigger Than You Think

by Doug Short

Business Insider

May 31, 2012

"PIIGS" we are informed in the current Wikipedia entry "is a pejorative acronym used to refer to the economies of Portugal, Italy, Greece and Spain. Since 2008, the term has included Ireland, either in place of Italy or with an additional I."

With apologies, I am joining the ranks of contributors to such august publications as the New York Times, Wall Street Journal, Financial Times and The Economist who have used this handy label as a linguistic convenience and, I believe, with no aspersions intended.

My topic is the relative size of these five countries in a basic economic sense -- to one another and to the world as a whole. To make comparisons, I'm using GDP based on purchasing power parity (PPP). My source for the data is the IMF (International Monetary Fund), specifically the IMF's World Economic Outlook Databases.

The complete IMF database includes over 180 countries. For the chart below, I used the 58 countries with the largest GDP, which thereby includes the newcomer and smallest of the PIIGS (both in size and GDP) -- Ireland.


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Central Banker Calls Euro Zone Structure ‘Unsustainable’

New York Times
May 31, 2012

The president of the European Central Bank, Mario Draghi, warned Thursday that the structure of the euro currency union had become “unsustainable” and criticized political leaders who he said had been slow to respond to a regional debt crisis now well into its third year.

On the desperation scale, the plea by Mario Draghi to European lawmakers Thursday was not on the same level as the genuflection to congressional leaders in 2008 by the U.S. Treasury secretary at the time, Henry M. Paulson Jr., who was begging them to approve a huge bank bailout.

But the note of frustration and urgency in Mr. Draghi’s voice made clear that he was aware of the problems in the euro zone that he said only the member nations’ politicians could now solve.

There have been many spikes in the euro zone’s crisis fever in the past, of course, with a bailout here or a stopgap measure there seeming to calm things for a while. But this time, Europe may have reached a moment when the currency union’s survival depends on a powerful, convincing response.

Greece, progenitor of the debt debacle, is in political turmoil once again, and this time it is in danger of dropping out of the euro zone altogether. Spain, with one of the region’s largest economies, is in the grip of a banking crisis, and there is a growing sense that the danger to Spanish banks is of an entirely different order of magnitude from that in suffering but small Greece.

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German bonds hold the secret to the eurozone crisis

by Stephen King

Financial Times

May 31, 2012

Imagine – if you possibly can – that the eurozone crisis is finally resolved. The dust has settled. The euro is still in one piece. How would we have got there?

A lasting solution will require a shift in belief. Belief, in turn, can be measured through bond spreads and, in particular, the level of German yields.

Many investors now expect – and more than a handful of policy makers now fear – that the end is nigh, that the euro is on its last legs. As that belief festers, its self-fulfilling qualities threaten the euro’s survival.

The consequences of that belief are all around us. Slow motion bank runs, widening sovereign spreads and biting recession are symptoms of an underlying fear that the euro will crumble.

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Paul Krugman: Greece will leave the euro

BBC News
May 31, 2012

Nobel Prize winning economist Paul Krugman says Greece will have to leave the euro. Speaking to BBC HARDtalk's Sarah Montague he says there was no alternative but whoever makes the decision for Greece to go would simultaneously be ending their own political career.

See the video

At Core of Greek Chaos, a Reviled Tax

Wall Street Journal
May 30, 2012

When the Greek government surprised homeowners in September by imposing a new national property tax, the mayor of this down-at-the-heels suburb on the western fringe of Athens sprung into action—mobilizing against it.

Stavros Kasimatis opened his office to poor residents who refused to pay the tax, which had been added to electricity bills in an effort to boost Greece's woeful rate of revenue collection. Municipal workers told the residents to pay only for power, then helped them fill out legal paperwork asking a judge to prevent the electric company from shutting off the lights.

Mr. Kasimatis brought 1,165 of the petitions to a local district court. In February, he won.

"From the very first moment, we thought that this measure was unconstitutional," said Mr. Kasimatis, who campaigned with the support of left-leaning parties. "Power, energy, is a social right. They were blackmailing citizens."

Today, Greece is convulsing ahead of its most critical election in at least a generation. One of the flash points is the new property tax—a window into what has gone wrong with Greece, and with Europe's plan to rescue it.

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Spain’s Banking Rescue Should Become Example for Europe

Bloomberg
Editorial
May 31, 2012


Europe’s leaders can’t save their currency union without figuring out a way to salvage the region’s banks. Spain is a perfect place to start.

Perhaps no country better illustrates the mutually reinforcing links among the euro area’s banking, sovereign-debt and economic crises than Spain. Its banks are largely paralyzed amid concerns about heavy losses on real estate loans that, by various estimates, could require as much as 120 billion euros ($150 billion) in fresh capital to offset. Tight bank credit has in turn deepened the country’s economic slump, increasing banks’ potential losses and fueling fears that bailout costs will overwhelm the Spanish government’s already stretched finances. The longer the situation lasts, the worse it gets: Nervous investors pushed Spain’s 10-year borrowing rate as high as 6.7 percent Wednesday, up from less than 5 percent in early March.

Spain’s response has been far from adequate. Government- induced bank mergers haven’t reduced the system’s capital needs. Last week, the country’s third-largest bank, Bankia SA, said it would require 19 billion euros in fresh capital to cover losses -- far more than the resources available in the country’s bailout fund. A bank run of sorts has already begun: Central- bank data suggest that, in the first four months of this year, more than 100 billion euros in private money has fled Spain for other euro-area countries, an amount roughly equal to a 10th of the country’s annual economic output. A European Central Bank measure of deposits in Spain’s banks declined by 31.5 billion euros in April.

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Euro’s survival remains the big bet

by James Mackintosh

Financial Times

May 30, 2012

Eurozone investors have little more than black humour to lighten their days. “Grexit” has quickly become established jargon for a Greek exit, but markets on Wednesday were showing clear signs of “Spanic” – panic over Spain.

The flight to safety pushed the yield on German two-year bonds to zero for the first time ever, making them rather like banknotes that one cannot spend. Banknotes are harder to store in bulk but, as Germans discovered in the 1920s, in a pinch make handy wallpaper.

The euro fell again. Every major equity market dropped and Spanish 10-year bond yields rose above 6.7 per cent, a level breached on only four days in eurozone history. Investors question the ability of the flip-flopping government to cope with its failing banks and wobbling regional finances.

Investors are increasingly betting on deflation as the outcome – not inflation. The German bond market is priced for inflation at just 1.3 per cent over the next decade, lower than last autumn’s pricing.

But the survival of the euro remains the big bet. Investors hope German bonds will pay them back in more valuable Deutschmarks in a break-up.

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Wednesday, May 30, 2012

Europe Looks to Share Bank Burden

Wall Street Journal
May 30, 2012

The 17 countries that use the euro should set up a "banking union" that allows them to share the burden of bank failures, the European Union's executive arm said Wednesday, as worries grew about whether Spain has the financial strength to shield lenders suffering from a meltdown of its property market.

The European Commission called on the euro zone to allow its new rescue fund to directly prop up vulnerable banks—rather than pushing their home countries into full-blown bailouts.

It also raised the idea of a pan-European deposit insurance fund, which would further shield individual governments from the cost of expensive bank failures.

With its recommendations, the European Commission is setting itself up for a clash with rich euro countries—such as Germany, Finland and the Netherlands—that have so far stamped out any attempts to make them more responsible for the financial troubles of their weaker partners.

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Today in Europe

Economist
May 30, 2012

The battle for the euro zone is a multi-front endeavour. For much of the past few weeks, the Greek front has been the more disconcerting. Fears have flourished over whether new June elections will produce a Greek government too hard-headed to come to terms with (just-as-hard-headed) German officials over whether and how to modify Greece's latest bail-out deal, leading to a potential Greek exit. But over the past few days, attention has shifted to a deteriorating situation in Spain.

Spanish banks have been hammered by the country's property-market collapse, and matters have come to a head over the past week thanks to troubles at Bankia. Fears of deposit flight and a tumbling share price forced the Spanish government to plan for a bail-out. The handling of rescue announcements has been badly bungled, however. Rumours circulated that Spain would recapitalise Bankia by giving it government bonds which could then be pledged at the European Central Bank. The ECB was then said to oppose this idea, but the central bank later insisted that it had not been consulted on any recapitalisation plan. Spanish authorities, for their part, clarified that they would recapitalise the bank by selling new €19 billion in new government debt.

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Europe's Banking Dis-Union

by Simon Nixon

Wall Street Journal

May 30, 2012

A banking union for Europe? What could possibly go wrong?

The European Commission, European Central Bank, the governments of Italy, Spain and Ireland, among others, have all now thrown their weight behind calls for a pan-European bank-resolution fund, possibly backed up by a pan-European deposit guarantee fund and pan-European supervisor.

Even Germany doesn't rule out allowing European bailout funds to inject capital directly into banks rather than channeling funds via national governments. But will governments be willing to make the necessary sacrifices of sovereignty to make this idea work?

Take the Spanish banking system: The idea of recapitalizing it with someone else's money is self-evidently attractive to Madrid since it will help break the link between sovereign and bank solvency, potentially allowing both to start funding themselves in the markets again. The idea is also superficially attractive to the rest of the euro zone since the cost of recapitalizing Spain's banks could cost Madrid market access, forcing it to seek a multiyear funding program that could stretch euro-zone bailout funds to a breaking point.

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Two Insurers Halt New Export Credit Cover for Greece

Wall Street Journal
May 30, 2012

Two of the world's biggest trade insurers said Wednesday they won't offer new insurance cover for exporters shipping goods to Greece as they find it increasingly difficult to price such cover amid worries that the country may quit the euro zone.

Credit export insurance ensures that exporters are paid if their client defaults. The loss of such cover is likely to have a major impact on the willingness of companies to trade with Greece, given the country's deteriorating economy.

Euler Hermes SA, a unit of Germany's Allianz SE, said its management board decided late Tuesday that it won't provide insurance for new exports to Greece "due to the recent economic developments and political uncertainties."

The suspension remains in place "until further notice." A company spokeswoman said it will continue to insure exports currently en route to Greece and domestic trade within Greece, fulfilling existing contracts.

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European commission country scorecards

Guardian
May 30, 2012

Greece

After a near 7% contraction in GDP last year, the people of Greece are not expected to to have a better time in 2012. On almost every measure, from public administration to the size of its hidden economy, Athens is at the bottom of the EU table. The silver lining, says Brussels, is the way government spending and business subsidies have been cut to the bone over the last two years. Now it must press ahead with structural reforms.

Reaction: An election next month could back the EU's austerity plans on the promise of further bailout funds.

Stock market verdict: The FTSE Athex 20 finished down 3.7% at 185,51.

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Προτελευταία η Ελλάδα στην Παγκόσμια Επετηρίδα Ανταγωνιστικότητας

Ναυτεμπορική
30 Μαΐου 2012

Προτελευταία είναι η Ελλάδα στην Παγκόσμια Επετηρίδα Ανταγωνιστικότητας του Διεθνούς Ινστιτούτου Ανάπτυξης του Μάνατζμεντ (IMD).

Συγκεκριμένα, κατά τη διάρκεια του περασμένου έτους 2011, η Ελλάδα βρέθηκε στην 58η θέση της Παγκόσμιας Κατάταξης Ανταγωνιστικότητας μεταξύ των 59 χωρών οι οποίες μελετώνται από το διεθνές ινστιτούτο, σημειώνοντας πτώση κατά δυο θέσεις σε σχέση με την περσινή κατάταξη. Η χώρα μας ξεπερνά μόνο τη Βενεζουέλα, η οποία βρίσκεται σταθερά στην 59η θέση της διεθνούς κατάταξης από το 2004.

Οι δέκα πιο ανταγωνιστικές χώρες παγκοσμίως είναι κατά σειρά κατάταξης: το Χονγκ – Κονγκ, οι Ηνωμένες Πολιτείες Αμερικής, η Ελβετία, η Σιγκαπούρη, η Σουηδία, ο Καναδάς, η Ταϊβάν, η Νορβηγία, η Γερμανία και το Κατάρ.

Αντίθετα οι δέκα χώρες – ουραγοί στην Παγκόσμια Επετηρίδα Ανταγωνιστικότητας για το 2012 είναι η Νότια Αφρική, η Σλοβενία, η Κολομβία, η Ρουμανία, η Ρουμανία, η Βουλγαρία, η Αργεντινή, η Ουκρανία, η Κροατία, η Ελλάδα και η Βενεζουέλα.

Οι πλέον ανταγωνιστικές οικονομίες στην Ευρώπη για το 2012, είναι κατά σειρά: η Ελβετία (στην 3η θέση), η Σουηδία (στην 5η θέση) και η Γερμανία (στην 9η θέση), οι οποίες έχουν ως βασικά ανταγωνιστικά τους πλεονεκτήματα τις εξαγωγές βιομηχανικών προϊόντων και τη δημοσιονομική πειθαρχία.

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Διάβασε την έρευνα

Το κόμμα της δραχμής

του Ι.Κ. Πρετεντέρη

Τα Νέα

30 Μαΐου 2012

Ειλικρινά , δεν ξέρω ποιος θα νικήσει στις εκλογές. Είμαι βέβαιος, όμως, ποιος πρέπει να ηττηθεί: το κόμμα της δραχμής!

Ξέρω. Κανένας κομματικός σχηματισμός με αυτήν την επωνυμία δεν μετέχει στην εκλογική αναμέτρηση. Είμαι βέβαιος, όμως, ότι όλοι καταλαβαίνουμε για ποιους μιλάμε και όλοι αντιλαμβάνονται ποιους εννοούμε.

Μιλάμε για μια ακροαριστερή και ακροδεξιά ιδεοληψία που θέλει την Ελλάδα έξω από την Ευρώπη διότι πιστεύει ότι έτσι θα την οδηγήσει ευκολότερα στον ολοκληρωτισμό - μαύρο ή κόκκινο, αδιάφορο...

Μιλάμε για έναν πολιτικό, επιχειρηματικό και δημοσιογραφικό υπόκοσμο ο οποίος προσπαθεί να εκτροχιάσει τη χώρα για να σώσει το τομάρι του ή επειδή ελπίζει να φιγουράρει σε κάποιο καινούργιο «σύστημα εξουσίας» που θα προκύψει από την καταστροφή.

Μιλάμε, όμως, και για θυμωμένους ή απελπισμένους συμπολίτες μας που θέλουν να εκδικηθούν την κοινωνία που τους απέλπισε - κι ας καταστραφούν και αυτοί μαζί της!
Λυπάμαι αλλά, αν θέλουμε να σωθεί η χώρα, όλοι αυτοί πρέπει να ηττηθούν. Ο δρόμος στον οποίο μάς σπρώχνουν είναι ένας δρόμος χωρίς επιστροφή.

Μαζί τους, όμως, πρέπει να ηττηθεί και η κουτοπονηριά που αναρωτιέται: εντάξει το ευρώ, αλλά με κάθε θυσία;

Ε, λοιπόν, ναι. Με κάθε θυσία! Διότι δεν πρόκειται για το ευρώ. Αλλά για την Ευρώπη.
Διότι δεν συζητούμε μόνο για ανέργους ή λουκέτα. Αλλά για τη συνολική πορεία του τόπου.

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Top insurer pulls cover for exports to Greece

Reuters
May 30, 2012

The world's biggest trade credit insurer, Euler Hermes, has suspended cover for exporters shipping to Greece because of the mounting risk of them not being paid in the event the debt-laden nation is forced out of the euro.

"Euler Hermes has decided no longer to cover deliveries to Greece for the foreseeable future," a Euler Hermes spokesman told Reuters on Wednesday.

Existing contracts will be honored, but Euler Hermes will not underwrite any new Greek business, the spokesman said, adding that the insurer would reconsider "as soon as the situation improves".

A Greek exit from the euro zone would force companies there to revert to the drachma, which would likely fall sharply against the single currency to reflect Greece's fiscal crisis.

That would restrict Greek importers' ability to pay euro-denominated invoices, potentially inflicting big losses on European suppliers that would be recoverable from their trade credit insurers.

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Amid the deepening crisis, European commission is in denial

by Larry Elliott

Guardian

May 30, 2012

With Spanish bond yields heading rapidly towards 7%, the Greek economy on the point of meltdown and the future of the single currency increasingly in question, the timing could hardly have been better for Brussels to publish its report cards on the 27 members of the European Union. This was the perfect moment for the European commission to take stock, weigh up the policy options and announce a plan to deal with the unfolding crisis.

The documents reflect the gloomy mood. There is a recognition that monetary union is going through its most troubled period since its creation. There is an acknowledgement - of sorts - that current policies are not working. And there are suggestions, born of desperation, for how Europe should respond: with common bonds, a banking union and the direct injection of funds into shaky banks from its permanent bail-out fund.

This was enough to give the financial markets a sugar rush as dealers took comfort from the fact that Brussels was perhaps a bit less clueless than it has appeared to be for the past few months. As a strategy for resolving the crisis, however, it will prove to be another dud. For one thing, all the big ideas have been floated before and all have been met with a resounding "nein" from Angela Merkel.

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Euro-Crisis Response Draws In Top White House Officials

Wall Street Journal
May 30, 2012

Top officials in the Obama administration have long held talks with European leaders about the ongoing debt crisis, but discussions are reaching a new level this week as problems in Greece and Spain appear to be escalating.

Earlier in the week, the Treasury Department dispatched its top economic diplomat – Lael Brainard – to Greece, France, Spain and Germany for talks with European leaders. She is expected to stay until at least the end of the week.

On Wednesday, President Barack Obama held a videoconference with German Chancellor Angela Merkel, French President Francois Hollande, and Italian Prime Minister Mario Monti.

“They discussed developments in Europe, following up on the discussions held at the G-8 Camp David Summit and at the informal meeting of European Union Leaders last week,” the White House said, offering little else.

Meanwhile, Treasury Secretary Timothy Geithner, who has been actively involved in talks with European leaders for more than three years, is meeting Thursday with Spanish Vice President Soraya Saenz de Santamaria. Mr. Geithner is also meeting Thursday with Mr. Obama at the White House.

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EU Proposes a 'Banking Union'

Reuters
May 30, 2012

The European Union said that the 17 euro-zone countries should consider setting up a "banking union" to share the burden of bank failures, Matina Stevis reports on Markets Hub.


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An Argentine Guide to the Greek Crisis

by Andres Velasco

Project Syndicate

May 30, 2012

Policymakers in Europe seem to be surprised at the ongoing bank run in Greece (and the nascent run in Spain). They should not be. Anyone familiar with emerging-market meltdowns knows that a financial crisis nearly always follows a fiscal crisis.

Argentina’s default in 2001 is but one useful example. In the Argentine crisis, the economy contracted by 18% and unemployment soared to 22% of the labor force. Greece is already close to these levels.

Argentina went through a complete and chaotic default on its public debt. In Greece, the “haircut” imposed on creditors so far has been managed by the European Union and the International Monetary Fund. But, with debt still unsustainable, the next round of Greek default could well make Argentina’s look positively Teutonic in its orderliness.

In Argentina, the banking system came close to collapse, causing the government to ban bank withdrawals – introducing the so-called corralito, or bullpen, for deposits – and establishing capital controls. That could be the stage that Greece is entering now. So, if the precedent of the Argentine and other emerging-market crises is a useful guide, what could be in store for Greece next?

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Why it matters if Greece leaves the eurozone

by Jill Treanor

Guardian

May 30, 2012

By rights, no one should care much about Target 2. It is an arcane piece of the plumbing in the eurozone that pushes euros around the system. It stands for Trans-European Automated Real-time Gross settlement.

The chart above, though, shows why it could start to matter if Greece (or even other countries) leaves the eurozone. Germany's banks, through the Bundesbank, have €640bn (£510bn) of balances in the system. Greece, for instance, has €107bn that it needs to pay back through the system, according to the last disclosed figures. Bank analysts at UBS point out that Spain, Italy, Ireland and Portugal are the other major debtors in Target 2.

The UBS analysts reckon that the €640bn that Germany has in credit could rise to €1tn as problems in the peripheral nations rise.

"This is a powerful incentive for the creditor nations to work on keeping the monetary union together," the UBS analysts said.

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Bundesbank Target2 balance. Source: UBS

In Greece, church’s tangled ties with government raise questions

Washington Post
May 30, 2012

With this Mediterranean nation’s finances on life support, some here have turned to the church for spiritual succor. Others say the government needs its cold, hard cash.

The Greek Orthodox Church has long been not just a religious force but also an economic one, with a stake in the Greek National Bank, landholdings second only to the Greek government and a clergy bankrolled by the state.

During a crisis that has already created widespread poverty, priests say they are serving the needs of hard-hit citizens whose government has failed them. But critics say that the church’s tax breaks and its tangled relationship with the political leadership here are starving the country of revenue at a moment when time and money are running short.

Greece is headed for parliamentary elections on June 17 that could determine its future on the shared euro currency, with a choice between leaders who favor the $163 billion bailout that is saving the country from bankruptcy and those who oppose the painful measures that come as a condition of the rescue. If voters reject the bailout, the government could be out of money by the end of August, with government employees short of their paychecks.

Those would include the more than 10,000 priests on state payrolls, who cost taxpayers $238 million a year. Tax breaks on the church’s landholdings keep even more money away from government coffers at a time when every euro counts, critics say.

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EU Proposes 'Banking Union'

Wall Street Journal
May 30, 2012

The 17 countries that use the euro should consider setting up a "banking union" that allows them to share the burden of bank failures, the European Union's executive arm said Wednesday in a report on the currency union's crisis-fighting efforts.

To further stop expensive bank bailouts from pulling down governments' own finances, allowing the euro zone's new rescue fund to directly boost the capital of banks "might be envisaged," the European Commission said.

At the moment, any financial aid to prop up struggling banks would have to be requested by the firms' own government, pushing up its debt and deficit burden. The fear is that even if the government gets the required bank aid from the bailout fund, it would damage its efforts to raise money from the bond markets to finance the rest of its operations.

The Commission's suggestion for a banking union comes as vulnerable euro countries like Italy and Spain have seen borrowing costs jump in recent weeks while the euro's value has slumped. Spain's troubles, in particular, have been compounded by the weakness of banks suffering the effects of a property-market meltdown.

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Greek exit from the Eurozone: Neither inevitable nor desirable

by Avinash Persaud

Vox

May 30, 2012

Should Greece leave the Eurozone? This column argues that aggressive restructuring of Greek debt within the Eurozone, rather than departure, is the best option.


Glance at the headlines and you would think that Greek withdrawal from the Euro is a mere formality. Plans are being drawn up, we are told, by responsible policymakers and businessmen. Hedge funds have laid on their bets. Speculation has moved on to whether Greece’s exit will mark the end of the euro. This takes self-fulfilling prophecies to a new level. Greek departure from the Eurozone is a possibility, but is far from inevitable. Departure from the euro worsens the economic problems facing Greece and Europe and so if those who will make the decision are immune from bubbling nationalism, they will opt against it (see Xafa 2012). Aggressive restructuring of Greek debt within the Eurozone, not departure, is the best path. A path made more possible now that Greek austerity is delivering a budget surplus before interest payments.

Outside of Greece, most believe the root of the problem is that Greeks are overpaid, undertaxed and over-indulged by state benefits. Foreigners are always too much of this or too little of that, but even if these opinions were right, such issues of labour productivity, fiscal legitimacy, and financial responsibility, could never be solved by the re-adoption and devaluation of a local currency. Devaluations serve to keep the current show on the road by temporarily devaluing local wages and savings against those overseas. Just before joining the euro, Greece devalued the drachma versus the deutschmark by 14%, the last in a long string of devaluations, but that competitive boost, like those before it, did not last. Arguably the way to deal with such fundamental issues is to tie the macroeconomy to an anchor of value and focus on sorting out labour and tax reforms which, it is often argued, German Chancellor Schröder successfully managed a decade ago, helping to explain Germany’s competitiveness today.

Uncontroversially, re-adoption and devaluation of the drachma would cause the value of Greece’s debt as a percentage of GDP, already at 160%, to soar, probably doubling or trebling, as this €356 billion of debt promises to be repaid in euros. Any devaluation would have to be followed by a default. It is a hopeless and useless strategy proposed by those enjoying Schadenfreude at the Eurozone’s difficulties. Greece looks insolvent. Pelting liquidity at it will not help. Greece should therefore restructure its debt. Lifting the pressure on reforming productivity, taxation and state benefits by devaluing would be neither sufficient nor necessary.

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'It is virtually impossible to find a job': Brain drain is new Greek tragedy

NBC News
May 29, 2012

Thousands of well-educated workers are fleeing Greece as the eurozone crisis batters their homeland.

Germany, Europe's economic powerhouse and a country which has been criticized by many Greeks over its harsh demands for austerity cuts in return for bailout cash, has experienced an influx of young skilled immigrants.

Der Spiegel magazine noted that while Greek newspapers "printed cartoons depicting the Germans as Nazis, concentration camp guards and eurozone imperialists who allow their debtors to bleed to death," the Greeks have kept arriving – bringing an "anything is better than Athens" attitude with them.

With more than 50 percent of young Greeks out of work, it's not surprising that official statistics show the number of Greeks who moved to Germany increased 90 percent during 2011.

Unemployment rates have consistently been shrinking in Germany in recent years and the economy is thriving despite Europe's ongoing financial crisis. Relaxed cross-border employment regulations for member states of the European Union also make Germany an attractive choice for job seekers. And while Germany is in need of specialized workers, the Greek labor market has little to offer.


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Ο εφιάλτης της εξόδου από το ευρώ

Καθημερινή
30 Μαΐου 2012

Εφιαλτικές θα είναι οι συνέπειες μιας ενδεχόμενης εξόδου από το ευρώ, σύμφωνα με μελέτη της Εθνικής Τράπεζας. Το κατά κεφαλήν ΑΕΠ θα μειωθεί κατά 55% τουλάχιστον, από τα 19.400 ευρώ σήμερα σε 8.700, πλήττοντας κυρίως τους οικονομικά ασθενέστερους. Η ανεργία θα εκτοξευθεί στο 34% και ο πληθωρισμός θα ανέλθει στο 32%, παρασύροντας σε επίπεδα άνω του 35% τα επιτόκια δανεισμού νοικοκυριών και επιχειρήσεων. Σύμφωνα με τη μελέτη, ελάχιστα θα ήταν τα οφέλη από την εισαγωγή ενός υποτιμημένου εθνικού νομίσματος στην ανταγωνιστικότητα, αφού οι βασικοί εξαγωγικοί κλάδοι της ελληνικής οικονομίας βασίζονται σε εισαγόμενες πρώτες ύλες, οι τιμές των οποίων θα αυξηθούν κατακόρυφα. Η Εθνική Τράπεζα εκτιμά ότι η αναδιαπραγμάτευση του Μνημονίου θα πρέπει να επικεντρωθεί σε συγκεκριμένα σημεία, όπως η στήριξη των ανέργων. Εάν η Ελλάδα υιοθετήσει και εφαρμόσει με αξιόπιστο τρόπο τα υπόλοιπα σημεία του Μνημονίου, οι Ευρωπαίοι εταίροι θα συμφωνούσαν πιθανόν σε επιμήκυνση του χρόνου για μείωση του ελλείμματος και στην επιπλέον χρηματοδότηση που αυτή απαιτεί, η οποία υπολογίζεται σε 5 - 10 δισ. ευρώ.

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Αποδιοπομπαίος τράγος

του Γιώργου Παπαϊωάννου

Το Βήμα

30 Μαΐου 2012

Η Κριστίν Λαγκάρντ είναι έμπειρη πολιτικός. Πριν αναλάβει τα ηνία του ΔΝΤ ήταν υπουργός Οικονομικών της Γαλλίας και πριν από αυτό υπουργός Γεωργίας και Εμπορίου, ενώ υπήρξε στενή συνεργάτιδα του πρώην γάλλου προέδρου Νικολά Σαρκοζί. Ως εκ τούτου γνωρίζει πολύ καλά από εκλογές και τον αντίκτυπο που έχουν σε προεκλογική περίοδο δηλώσεις σαν και αυτές που έκανε στη βρετανική εφημερίδα Τhe Guardian. Αρα λοιπόν μόνο τυχαίες δεν μπορεί να χαρακτηριστούν.

Προσπαθώντας να εξηγήσουμε τη στάση της, δύο είναι τα ενδεχόμενα: είτε μπλοφάρει, είτε συνειδητά σπρώχνει τους ψηφοφόρους σε αντιμνημονιακές επιλογές για να διευκολυνθεί η έξοδος της Ελλάδας από το ευρώ.

Αν αποδεχθούμε τη λογική της μπλόφας, η επικεφαλής του ΔΝΤ προσπαθεί να «τρομοκρατήσει» τους ψηφοφόρους και να τους οδηγήσει σε μνημονιακές επιλογές, όπως υποστηρίζει ο ΣΥΡΙΖΑ.

Στην περίπτωση αυτή, όλοι σπρώχνουν στα άκρα καθώς βαδίζουμε στις εκλογές, αλλά στη συνέχεια θα πρυτανεύσει η λογική και θα υπάρξουν αμοιβαίες υποχωρήσεις. Όμως το πρόβλημα της Ευρώπης θα πρέπει να λυθεί με πληγωμένη πλέον την αξιοπιστία των ευρωπαίων πολιτικών.

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U.S. Seeks Action on Europe Crisis

Wall Street Journal
May 29, 2012

The Obama administration dispatched one of its top economic officials to Europe on Tuesday to press officials in Greece, Spain, France and Germany to calm a widening crisis that threatens to spark new trouble for the U.S. economy.

The latest push by the Treasury Department's under secretary for international affairs, Lael Brainard, comes as the debt troubles in Europe mount amid Greece's political standoff and renewed threats to Spain's financial system.

U.S. officials are pressing Europe on several fronts, including a broader role for the Continent's €700 billion ($878 billion) rescue fund, according to people familiar with the matter. Allowing the fund to directly recapitalize European banks—instead of forcing troubled nations to borrow from the fund for that purpose, potentially putting them under even more market pressure—could calm fears of cascading bank runs in Spain and other nations even before Greece's June 17 election.

The Treasury Department declined to comment on its specific goals. Ms. Brainard "will meet with senior government officials in each country to discuss their plans for achieving economic stability and growth in Europe," it said in a statement. Ms. Brainard met with interim Greek Finance Minister George Zannias on Tuesday. On Wednesday, she will see officials in Frankfurt—home to the European Central Bank—and Madrid, followed by stops Thursday and Friday in Paris and Berlin.

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Ακαδημία Αθηνών: Η συγκυρία της κρίσης ευκαιρία για μεταρρυθμίσεις

Το Βήμα
10 Μαΐου 2012
Η χώρα μας ευρίσκεται σήμερα σε εξαιρετικά δύσκολη καμπή. Έχει πρόβλημα δανεισμού, αλλά ταυτόχρονα έχει υψηλό δημόσιο χρέος, σοβαρό έλλειμμα ανταγωνιστικότητας, μη βιώσιμο ασφαλιστικό σύστημα, ιδιαίτερα κακή δημόσια διοίκηση και μεγάλο και σπάταλο κράτος. Επομένως, ακόμη και αν λυθεί το πρόβλημα δανεισμού, η λύση των υπόλοιπων προβλημάτων είναι επείγουσα και πιεστική. Η έξοδος της οικονομίας από την κρίση δεν διασφαλίζει σταθερή και βιώσιμη ανάπτυξη αν δεν συνοδεύεται από μεταρρυθμίσεις. Η παρούσα συγκυρία παρέχει, παραδόξως, την καταλληλότερη ευκαιρία για διαρθρωτικές μεταρρυθμίσεις.
Αυτό είναι το βασικό συμπέρασμα της μελέτης Η προώθηση των μεταρρυθμίσεων στην ελληνική οικονομία, που παρουσίασε στις 10 Μαΐου στην Ακαδημία Αθηνών ο Ακαδημαϊκός κ. Κωνσταντίνος Δρακάτος.

Η μελέτη εκπονήθηκε από τους Καθηγητές κ. Γ. Μέργο και κ. Α. Μακρυδημήτρη, με επιστημονικούς συνεργάτες τούς κ. Δ. Παπαοικονόμου, κα. Μ.-Η. Πραβίτα και κ. Π. Πρόντζα, στο πλαίσιο του ερευνητικού προγράμματος του Γραφείου Οικονομικών Μελετών της Ακαδημίας Αθηνών.

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Παρουσίαση της Μελέτης

Όταν τα παιδιά των πλουσίων χωρών συναντούν την κρίση

Το Βήμα
30 Μαΐου 2012

Έκθεση που δεν αφήνει καμία κυβέρνηση να επαναπαύεται, παρουσιάζει η Unicef, καθώς τα μέτρα λιτότητας και οι περικοπές των κοινωνικών δαπανών «συναντούν» στους κόλπους της Ευρωπαϊκής Ένωσης περίπου 13 εκατομμύρια παιδιά (συμπεριλαμβανομένης της Νορβηγίας και της Ισλανδίας) που στερούνται βασικά κοινωνικά αγαθά αλλά και 30 εκατομμύρια παιδιά σε σύνολο 35 χωρών, με αναπτυγμένες οικονομίες, που ζουν σε συνθήκες φτώχειας.

Συγκεκριμένα, η έκθεση - που διεξήγαγε το Κέντρο Ερευνών Innocenti της Unicef - εμπεριέχει Δείκτη Παιδικής Αποστέρησης, ορίζοντας ως αποστερημένο ένα παιδί όταν λείπουν δυο ή περισσότερα αγαθά από ένα κατάλογο 14 βασικών προϊόντων, όπως τρία γεύματα την ημέρα, ένα ήσυχο μέρος για τη σχολική εργασία του, εκπαιδευτικά βιβλία στο σπίτι, ή μία σύνδεση στο Internet.

Τα υψηλότερα ποσοστά αποστέρησης εμφανίζουν η Ρουμανία, η Βουλγαρία και η Πορτογαλία, με ποσοστά που υπερβαίνουν το 70%, το 50% και το 27% αντιστοίχως, ενώ ακόμη και πλούσιες χώρες όπως η Γαλλία και η Ιταλία εμφανίζουν παιδική αποστέρηση άνω του 10%. Σε επίπεδα κάτω του 3% κινούνται αντιθέτως οι Σκανδιναβικές χώρες_ με την Ισλανδία (0,9%) στην πλεονεκτικότερη θέση.

Η Ελλάδα βρίσκεται στην 21η θέση, με 17,2%, αμέσως μετά την Ιταλία και πριν από τη Σλοβακία. «Η έκθεση καθιστά σαφές ότι ορισμένες κυβερνήσεις τα καταφέρνουν πολύ καλύτερα στην αντιμετώπιση της παιδικής αποστέρησης σε σχέση με άλλες», τονίζει ο κ. Γκόρντον Αλεξάντερ, διευθυντής του Γραφείου Ερευνών της Unicef, σχολιάζοντας τις εντυπωσιακές διαφορές που διαπιστώνονται μεταξύ χωρών με παρόμοιες οικονομίες. «Αυτές με τις καλύτερες επιδόσεις, δείχνουν ότι είναι δυνατή η αντιμετώπιση της φτώχειας στις παρούσες οικονομικές συνθήκες».

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Διαβάστε την έκθεση (Measuring Child Poverty)

Pissarides Says Euro Exit Would Aid Rich Greeks at Cost to Poor

Bloomberg
May 30, 2012

Nobel economics laureate Christopher Pissarides said wealthy Greeks would benefit at the expense of poorer citizens were the country to exit the euro.

“A lot of Greeks” have withdrawn money and deposited it with banks elswhere in the 17-nation currency zone, Pissarides said in an interview in London today. If the country returned to the drachma, the new currency would be so devalued they could buy it cheaply on international markets with the cash they’d exported, enabling them to buy more assets in Greece.

While poorer Greeks are equally able to appreciate the difficulties facing their country, they’re not as able to shield their funds from an exit from the common currency, Pissarides said. They need to preserve quick access to their savings, which isn’t as easy to do if it’s held at a foreign bank, and such lenders may not always accept small deposits.

“It’s the wealthy who will benefit because that’s who’s able to move their money abroad,” he said. “Wealthy Greeks have already done it, whereas the small saver is not going to do it.”

Greece is due to hold second elections next month after a May 6 ballot left politicians unable to form a government, raising speculation the nation may exit the euro area. Households and businesses pulled 34 billion euros ($42 billion) from Greek banks in the 12 months ended in March, 17 percent of the country’s total, according to the European Central Bank.

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Cap-and-Punt Is the Wrong Way to Cut Future Deficits

by Peter R. Orszag

Bloomberg

May 30, 2012

Bracing for more economic shocks from Europe, the U.S. urgently needs a barbell fiscal policy. That is, more immediate stimulus and more deficit reduction that is designed to take effect over time.

Unfortunately, policy makers are failing on both sides, mostly ignoring the need for additional stimulus while also becoming enthralled with the wrong kind of future deficit reduction.

As I pointed out in last week’s column, history shows we are capable of setting deficit reduction for the future and sticking to it -- as long as the delayed measures are specific and gradual. But it is also possible to set up future budget cuts that have little chance of actually happening and therefore lack credibility.

A good illustration of how to do future deficit reduction the wrong way is the Sustainable Growth Rate formula for Medicare, which was enacted in 1997 to constrain payments to doctors. The SGR places a broad cap on payments without addressing any of the reasons those payments are increasing. If the cap is exceeded, payments are supposed to be simply cut across the board.

It’s much easier to slap a cap on spending than to get into the weeds of making policy changes to constrain that spending. It generally doesn’t work, though. Not surprisingly, Congress has repeatedly waived the SGR cap by legislating “doc fixes,” temporary patches that cancel the scheduled payment reductions. Although these interventions have not fully restored physician payments to what they would have been, the SGR has had much less effect than if it had been fully implemented.

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Euro Bonds With Strings Are Europe’s Best Way Forward

by Clive Crook

Bloomberg

May 30, 2012

Whether Greece keeps the euro or abandons it, the European Union must strengthen its defenses against a wider attack on its monetary system, and soon.

This will inevitably require steps toward fiscal union. Yet popular support for deeper political integration in the EU, never high to begin with, is lower than it has been for years. How can you have closer fiscal union without closer political union?

At the simplest level, you can’t. This contradiction is a brute fact that the EU’s leaders can’t just wish away. The most they can do is blunt its force by choosing the right form of limited fiscal union -- one that protects national sovereignty and national interests as much as possible.

Forget full fiscal union. This crisis has already stretched European solidarity, such as it was, to the breaking point. There’s no support for creating a federal structure of the U.S. kind, with a centrally managed budget and automatic fiscal transfers from rich to poor regions. To stride in that direction when Europe’s citizens are so plainly opposed would be madness.

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EU Won’t Treat Irish as Greeks If They Vote ’No’

by John O’Brennan

Bloomberg

May 30, 2012

The eyes of the world are on elections in Greece next month that could determine whether it defaults and triggers contagion throughout the euro area. By contrast, Ireland’s referendum tomorrow on whether to ratify Europe’s new fiscal treaty is passing almost unnoticed.

That’s odd, because although Ireland can’t veto the pact -- its full name is the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union -- the government is warning voters that the very same thing could happen here as in Greece.

As in Greece, austerity in Ireland has been imposed by a coalition government of established centrist parties, Fine Gael and Labour. And as in Greece, the government is warning that unless voters cast their ballots the right way, the country could be cut off from access to funding provided by the European Stability Mechanism. That would certainly trigger an Irish default.

Why, supporters of a “Yes” vote ask, would the rest of the euro area go on bailing out a member that has rejected the rules of the currency union? And if, as most economists believe, Ireland will need a second bailout, the fiscal treaty’s preamble is explicit: It states that “the granting of assistance in the framework of new programs under the European Stability Mechanism will be conditional, as of 1 March, 2013, on the ratification of this Treaty.”

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Tuesday, May 29, 2012

Why Does the Laziest Country in Europe Work the Most?

by Derek Thompson

Atlantic

May 29, 2012

This morning, I posted a funny, sad, and telling chart that revealed that the UK, Germany and Spain consider Greece to be the laziest country in Europe. Greece, on the other hand, voted itself the most industrious nation in the EU.


It turns out that the Greeks are right and the rest of Europe is wrong -- in a way. Greece is the hardest-working country in the EU -- and one of the hardest-working advanced countries in the world -- if you choose to go by OECD's international ranking of average hours worked per person per year, which I've graphed below (with the Y-axis truncated to clarify the comparison):


Now, wait a second. Is Greece the hardest-working country in Europe, or the least-hardworking? How can it be both?

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Most Aid to Athens Circles Back to Europe

New York Times
May 29, 2012

Its membership in the euro currency union hanging in the balance, Greece continues to receive billions of euros in emergency assistance from a so-called troika of lenders overseeing its bailout.

But almost none of the money is going to the Greek government to pay for vital public services. Instead, it is flowing directly back into the troika’s pockets.

The European bailout of 130 billion euros ($163.4 billion) that was supposed to buy time for Greece is mainly servicing only the interest on the country’s debt — while the Greek economy continues to struggle.

If that seems to make little sense economically, it has a certain logic in the politics of euro-finance. After all, the money dispensed by the troika — the European Central Bank, the International Monetary Fund and the European Commission — comes from European taxpayers, many of whom are increasingly wary of the political disarray that has afflicted Athens and clouded the future of the euro zone.

As they pay themselves, though, the troika members are also withholding other funds intended to keep the Greek government in operation.

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The riddle of German self-interest

by Martin Wolf

Financial Times

May 29, 2012

How will the crises inside the eurozone end? Many people have asked me this question in the US in recent weeks. How, in particular, might the eurozone move from crisis into stability? To address this question, we need to distinguish three aspects of the turmoil: where the eurozone is going; where Germany wants the eurozone to go; and where the eurozone needs to go.

The eurozone’s current position seems depressingly clear. A number of member countries, two of them – Italy and Spain – being large, already have, or are on the verge of having, governments unable to manage their public debt unassisted. Much of that debt is held by their banks. Many of these have been damaged, particularly in countries that experienced huge real-estate bubbles, large fiscal deficits or both. Governments with weak creditworthiness feel compelled to rescue fragile banking systems that are, in turn, expected to finance the governments trying to support them: the drunks are seeking to stay upright by leaning on one another.

Governments are also required to attempt fiscal austerity when private sectors are retrenching: between 2007 and 2012, the financial balance of the private sector shifted from deficit towards surplus by 16 per cent of gross domestic product in Spain (see chart). Austerity further weakens both economies and banks. This, in turn, raises unemployment and lowers government revenue, rendering fiscal austerity ineffective. Meanwhile, slack demand in the core reinforces economic weakness in the periphery, rather than offsets it.

With banks impaired, private demand damaged, government demand contracting and external demand weak, the fragile economies are likely to have smaller output and higher unemployment two or three years hence than now. The reward for pain today is pain tomorrow.

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Can Greece muddle through (again)?

by Robert J. Samuelson

Washington Post

May 29, 2012

Regarding Greece, I am puzzled by this: Why hasn't there been a massive run on its banks?

Suppose you were Greek and had, say, 2,000 euros deposited in a local bank. Why would you leave it there? Speculation grows by the day that Greece will be forced out of the euro and create its own national currency, probably the drachma. Bank deposits would presumably be automatically converted from euros into the new currency.

Worse, it's widely assumed that once the change occurs, the new currency will rapidly lose value (aka "depreciate") against the euro, dropping as much as 50 percent. Given the risks, it seems that any sensible person would withdraw the precious euros from the bank and keep them as cash or redeposit them in a bank outside Greece.

But so far, a panic hasn't happened, though there has been a slow, steady drain of deposits.

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Europe's Imperiled Institutions

by Nader Mousavizadeh and Erik Jones

New York Times

May 29, 2012

The euro zone crisis has spared few pillars of the nearly 60-year-old European project. The chasm between elite purpose and popular support is widening by the day, with little to suggest that political support for austerity without growth can be sustained for much longer.

It is one matter, however, for one set of political leaders — such as those in Spain, France and Italy — to be punished for the failure to manage effectively the aftermath of the financial crisis. It is quite another, for the institutions of Europe — including the European Central Bank — to face a crisis of confidence and legitimacy that threatens their very existence.

In Greece, the polls have moved again, raising a fresh round of questions about whether the Greek electorate remains committed enough to Europe to return a pro-austerity coalition when they vote on June 17. By contrast, the Irish referendum seems more secure. Irish voters have no love for their government and little enthusiasm for austerity, but they seem to accept that it is better to go along with Europe than to go it alone.

These two illustrations tell us a lot about the political economy of the crisis in Europe — about the Europe that still attracts and the Europe that is sinking under the weight of the current crisis.

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Eurobonds: il conto, la cuenta, l'addition, die Rechnung

Economist
May 29, 2012

One plan to resolve the euro zone debt crisis is for the common issue of eurobonds - each country's debt would be guaranteed by all the others. The rationale is that the overall level of European debt is not that high, when compared with the US; it is just distributed in an awkward way.

David Owen of Jefferies has come up with a ready reckoner, by assuming that euro zone debt would trade at the weighted average (based on issuance) of current yields (excluding Greece). Thus the cost of annual issuance for Germany would rise from the current 1.4% to 3.7%, while yields in Italy, Spain etc would fall. The result would be an annual cost for Germany of €49 billion, or around 1.9% of GDP. France would pay an extra €16 billion, or 0.8% of GDP. the Netherlands, Austria and Finland would all face costs of around 1% of GDP. That may not seem too bad a deal, given the predictions of the pain caused by a Greek exit, although it is worth pointing out it is an annual cost, not a one-off.

The biggest savings would accrue to Portugal and Cyprus, which would save 8.7% and 8.1% of GDP respectively. Ireland's borrowing costs would fall by 3.6% of GDP. Italy would save €37 billion, or 2.4% of GDP and Spain €18 billion, or 1.7%. Such a deal would knock a significant lump off their annual budget deficits.

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