Joke of the Week – Olli Rehn
…and it is widely
acknowledged, based on serious academic research, that when the public debt
rise above 90%, they tend to have a negative impact on economic dynamism, which
translates into low growth for many years.
The Commission’s
economic policy recommendations are not based on any single piece of research.
We design our policies on the basis of a broad-based assessment, drawing on a
wealth of studies – and also of course on our own analyses. The precise causal
relationship between debt levels and growth is a complex one. There is no
hard-and-fast rule; it is affected also by many country-specific factors.
Previously on MoreLiver’s:
Current Specials:
Special: US Q1-2013 GDP (new)
Special:
Reinhart & Rogoff Debacle (updated)
GENERAL
Italy’s new Prime Minister, trust in the EU falls, and should all EU states
recognise gay marriage?
Margaret Thatcher: European. – A Fistful of Euros
So why isn’t this more
obvious? I think the answer is that the European Union has not turned out to be
the nice alternative to Thatcherism it was sold as in the 1990s. Ask a
Spaniard. No, go ahead.
Blogs review: Bold
ideas for the eurozone from economic history – Bruegel
What’s at stake: In this review, I present an eclectic set of proposals
and analyses that have been put forward by economic historians to reform the
functioning the eurozone in a big way. The first category of proposals discuss
ways though which monetary policy could be differentiated across different
countries within the monetary union. The second category of analyses challenges
the now conventional view that a monetary union necessarily requires some form
of fiscal, banking and/or political union.
Should Eurozone current-account surpluses be
reduced? – voxeu.org
Current-account
deficits have caused problems in several Eurozone countries, but surpluses are
also an issue. This column argues that surpluses are detrimental to the welfare
of the population to the extent they are driven by structural weaknesses
affecting demand. Addressing these issues through structural reforms, while
letting wages and prices respond flexibly to market signals, would be
welfare-enhancing for the surplus countries.
MEPs slam Rehn over economic policy – euobserver
EU economic affairs
commissioner Olli Rehn faced a sustained verbal shellacking on Thursday, with
MEPs on the left and the right finding fault with his policy-making.
Why despite all the
bickering and complaints, Europe never
actually engaged in austerity, in spending or debt cuts, and that the primary
reason the people's plight in the periphery worsened in the past three years is
nothing more or less than gross political and governing incompetence?
Bellwether signals – Buttonwood
/ The Economist
The Economist
organised a conference on Europe yesterday
under the Bellwether title and your blogger had the honour of chairing it.
There was a very high-powered list of speakers - Jorg Asmussen of the ECB,
David Lipton of the IMF, Andrew Haldane of the Bank of England, Sushil Wadhwani
(ex-Goldman and monetary policy committee member), Thomas Mayer of Deutsche
Bank and so on.
Six ideas to save the EU – The
Guardian
The EU is facing
greater hostility from within than perhaps at any time since its incarnation.
Writers from six leading newspapers in the six largest countries suggest six
ideas to help redefine the union. Add your own thoughts below
Pure or wake-up-call contagion? – Bank
of Italy (pdf)
Another look at the
EMU sovereign debt crisis – Bank of Italy Working Papers by Raffaela Giordano,
Marcello Pericoli and Pietro Tommasino
Commission to propose measures to facilitate
workers' mobility – Europa
EU Austerity Dispute: How Barroso Let His
Opinion Slip – Spiegel
European Commission
President Barroso has mostly stayed in the background in the euro crisis, but
his assertion this week that austerity has "reached its limits"
caused quite a stir. It was an unusually opinionated statement -- and one that
came after the Portuguese official's national pride was questioned.
“A large part of the
clients of the Luxembourgian banks have undeclared money,” Steichen pointed
out. They wouldn’t have a lot of options other than closing their accounts in Luxembourg, he said. They might repatriate their funds –
and pay fees, taxes, and penalties – or transfer their funds to Singapore, Monaco, or other murky banking centers. Either way,
these assets would leave Luxembourg….
GERMANY
German Poll Shows Merkel Losing Majority – ZH
Given that the
mainstream parties have excluded a coalition with the Left party, such results
would allow only coalitions of Merkel's CDU/CSU with the SPD or the Greens.
This raises the question of whether Merkel becomes more hard-nosed in her
treatment of European bailouts
Europe needs a new deal that trades less austerity
for more structural reform. It can be done without costing Germany a euro cent. The contours of this shift are
starting to emerge, with Spain leading the way.
Germany has one of the lowest unemployment rates in the EU. But its labour
model has sparked a debate on social inequality.
German 'Alternative': Parallel Currency Idea
Carries Great Risks – Spiegel
A new German protest
party is proposing the gradual re-introduction of the national currencies of
highly indebted euro-zone countries. While the party's spokesman insists the
idea solves everyone's problems, it has one major drawback: Economists agree it
won't work.
German firms eye investment in crisis-battered
euro states – Reuters
German companies are
setting their sights on southern Europe as
fears of a euro zone breakup fade and economic reforms transform the
crisis-battered region into an attractive place to invest once again (also ZeroHedge).
How fair is the effort
to save the euro if the people living in the countries that receive aid are
wealthier than the citizens of donor countries like Germany? A debate over a redistribution of the burdens
is long overdue.
Yanis Varoufakis: Intransigent Bundesbank – naked
capitalism
Mr. Jens Weidmann’s surreptitious
campaign to bring back the (Greater) Deutsche Mark
EUROPEAN CENTRAL BANK
This chart shows how difficult Mario Draghi’s
job is – Wonkblog
/ WP
Different countries
within the euro zone are in vastly different economic situations, and ECB head
Mario Draghi will have a hard time satisfying everyone:
Not only did M3 come
out well below expectations at 2.6% YoY (vs 3% Exp.) but loans to the private
sector remain drastically in the red. The fragmentation across the individual
nations is dramatic…
Calling on the ECB to Act – Esoltas
I did a series of
three posts making the case for the European Central Bank to ease monetary
policy. I figured I would post them all together on my personal blog rather
than separately.
The wave of voices
calling for some ECB action is growing, particularly given the wider debate on
austerity. It will be tricky to balance this with the demands of the northern
countries.
Draghi's 'whatever it
takes' promise is maintaining a 30% illusion of wealth in European equities
over their macro reality.
March 2013: Monetary
developments in the euro area – ECB
(pdf)
Quarterly Bank
Lending Survey – ECB
(pdf)
Mmm Mmm Mmm Mmm – alphaville
/ FT
The annual growth rate of the euro-zone broad money supply (M3) falling
from 3.1 per cent to a well below expectations 2.6 per cent in March and
allowing a quick segue into a good news/ bad news post ahead of next week’s ECB
meeting and increasingly probable cut.
Ray of light in
Euro-zone credit numbers – Nordea
If you torture the data long enough, it will confess. One can find hope
in today’s Euro-zone credit numbers for March, though if you are pessimistic,
the data offers a lot for you as well.
SPAIN
[audio] ITB: The price of austerity – BBC
(mp3)
As Spain's unemployment figures reveal that 1 in 4
people is out of work there, In the Balance attempts to inject humanity into
the dry economic statistics. We're looking at the human cost of taking the axe
to public spending and asking if the cuts are actually working. Are they eating
away at the mountains of debt? And if not, what's the point of all those people
losing their jobs, homes and livelihoods? Manuela Saragosa debates austerity
with Anders Aslund from the Petersen Institute in Washington DC;
Irish economist, David McWilliams; and Yiorgos Mylonadis of the London Business School
The great Spanish nation can end its
crucifixion at will by leaving EMU – The
Telegraph
The course of events
demands a lifting of the taboo surrounding the dissolution of the euro zone. If
solidarity cannot be achieved through a progressive reform of Europe’s economic institutions, then perhaps it is
time to consider taking them apart. Perhaps the only way to save the Union is to ditch the euro.
Lagarde supports Spain’s moderation of austerity.
Spain
Update: Running from the Bulls?
– Marc
to Market
There have been three
recent developments in Spain: the new record high unemployment, the
earnings reports of several large banks, and the government's new fiscal
forecasts and strategy.
It took about one week from R&R's excel error until the first
European country rebelled against "austerity".
Housing in Spain:
Mortgaged to the hilt – The
Economist
After house price crash come repossessions and angry response.
OTHER PIIGS
Iceland's EU-sceptic opposition parties are poised to unseat the government in
elections this weekend, posing questions over its EU entry bid.
Erkki Vihriälä: Firstly,
deposits of domestic residents decreased 3.1 %, those of other euro area
residents 12.8 % and those from the rest of the world 9.3 %. Foreigners
therefore seemed more eager or more able to withdraw deposits from Cypriot
banks.
The Cypriot economy: Through
a glass, darkly – The
Economist
The outlook is even grimmer than it was before the bailout.
The Baltic countries
have already moved on from their debt crisis, and are exhibiting healthy
growth. In an interview with SPIEGEL ONLINE, Lithuania's President Dalia Grybauskaite explains that
austerity is merely a question of political will -- and why her country wants
to join the euro zone despite the crisis.