asterisk2a + emu   159

The euro crisis: We haven't forgotten how to make depressions | The Economist
GREECE is in a depression. A real deal, no kidding, bad-as-the-1930s depression.

The Greek economy is imploding for no other reason than that the prices are wrong.

***

sticky wages = sticky price for everything else

+

1930's Depression was excaserbated by countries sticking to the Gold standard.
The Euro is today Greece's, Spain's and so forth (PIIGS) Gold Standard that is ruinous.
EU Politicians made a grave error of judgement and assumptions - and are too stuck up as always to admit mistakes and revert course, OR drive full steam ahead with fiscal integration and assuming liabilities as a whole.

***

http://www.economist.com/node/21560252
book  Brussels  policy-makers  politics  economic-thought  goldstandard  gold  sticky-wages  economics  supply-demand  demand-curve  economic  history  Euro  EMU  Europe  policy  folly  policy  error  depression  2012  sovereign  debt  crisis  austerity  Greece  greatrecession  greatdepression 
august 2012 by asterisk2a
PIMCO | Investment Outlook - Cult Figures
​- The long-term history of inflation adjusted returns from stocks shows a persistent but recently fading 6.6% real return since 1912.
- The legitimate question that market analysts, government forecasters and pension consultants should answer is how that return can be duplicated in the future.
- Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades.

[[For FX traders, a burgeoning era of inflation will ensure that high levels of volatility continue. Central bankers will repeatedly be tested and money will skip around the globe.]]

= Countries that take the brunt right now are Australia, Canada, New Zealand, Singapore, Brazil, Switzerland etc. countries where there is wealth and trust in institutions and or got natural resources (commodities, growing consumer), or is a creditor nation.
accounting  global-economy  global  imbalances  developed  world  frontiermarkets  emergingmarkets  BRIC  Switzerland  hot-money  currency-war  currency  debasement  unintended  consequences  EMU  UK  BOE  ECB  Fed  centralbanks  monetary  theory  monetary  policy  economic-thought  deleveraging  debt  bubble  debtoverhang  confidence  trustagent  trust  politics  pension  pension  scheme  pension  obligation  pension  fund  financial  repression  economic  history  Europe  USA  lostdecade  greatrecession  GFC  PIMCO  new-normal  inflation  reflation 
august 2012 by asterisk2a
The euro crisis: When Draghi isn't everything | The Economist
The ECB could take some of the pressure out of the crisis by pursuing an appropriate monetary policy: by acting more aggressively in order to push nominal output back to trend, even though that would mean higher inflation in Germany. But this is no longer the ECB's crisis to solve. It might have been, at one point
France  PIIGS  2012  MarioDraghi  sovereign  debt  crisis  EMU  Germany  Politics  ECB 
july 2012 by asterisk2a
BBC News - Germany's AAA credit rating under review by agency
Core countries risk blowing up their debt/gdp bc of assuming PIIGS bailout liabilities/risk.

In reality, no new news.
2012  Grexit  Spain  creditrating  EMU  Europe  sovereign  debt  crisis  PIIGS  France  Germany 
july 2012 by asterisk2a
Euro Bank Supervisor Faces Hurdles - WSJ.com
Setting up a powerful euro-zone banking supervisor, a significant move toward closer economic union within the 17-nation currency bloc, was a German condition for its agreement to allow the bloc's bailout fund to recapitalize banks without first lending the money to their host government.

Bypassing governments is meant to help Spain, where worries have mounted that Madrid is becoming overloaded with debt as it tries to shore up its struggling banks.

"There is a pressure to move ahead relatively quickly," said one senior finance official from a euro-zone country. He added that even under the best of circumstances, getting the supervisor up and running would take nine to 12 months.

* Well, they just have 6 months.
moralhazard  European  Bank  Supervision  politics  toobigtofail  sovereign  debt  crisis  Europe  ECB  bailout  banking  crisis  crisis  PIIGS  Spain  germany  2012  EU  Bank  Supervision  EMU  Bank  Oversight  Fiscal  Pact  ESM 
july 2012 by asterisk2a
Why the EU summit decisions may destabilise government bond markets | vox
!! Only the ECB can stabilise bond markets !!

The only way to stabilise the government bond markets is to involve the ECB, either indirectly by giving a banking license to the ESM so that it can draw on the resources of the ECB (see Gros and Mayer 2010), or by direct interventions by the ECB. But the European leaders were unable (unwilling) to take that necessary step to stabilise the Eurozone.

The ECB is the only institution that can prevent panic in the sovereign bond markets from pushing countries into a bad equilibrium, because as a money-creating institution it has an infinite capacity to buy government bonds. The fact that resources are infinite is key to be able to stabilise bond rates. It is the only way to gain credibility in the market.

The SMP is the wrong precedent

**
My take, I am only buying half of the analysis. Outright bond buying would need a treaty change!? Another concern is rampant inflation expectations causing local bubbles.
bailout  greatrecession  inflation  expectations  IOU  fiscal  policy  Pact  lenderoflastresort  Eurobond  PIIGS  EMU  moralhazard  politics  Economics  monetary  theory  monetary  policy  trustagent  trust  ZIRP  QE  LTRO  SMP  ECB  EFSF  ESM  sovereign  debt  crisis 
july 2012 by asterisk2a
Wolfgang Münchau: Merkel hat auf dem Euro-Gipfel nichts aufgegeben - SPIEGEL ONLINE
Die Märkte waren in der Euro-Krise oft langsam, aber wenn sie erst einmal etwas geschnallt hatten, dann waren sie gnadenlos.

Das Problem ist, dass die Bundeskanzlerin sich in eine Ecke manövriert hat, aus der sie kaum wieder herauskommt.

[...] Und just zu diesem Zeitpunkt (2H 2012/1H 2013) schwächelt die Weltwirtschaft, von den USA bis nach China. Das bedeutet, dass sich die Krisendynamik zunächst verschlimmern wird. In den Problemstaaten der Euro-Zone werden die haushaltspolitischen Ziele in diesem Jahr alle verfehlt, und die Schulden steigen weiter an.

Ich sehe keine Lösung, außer der Einführung von Euro-Bonds oder zumindest einer kurzfristige Ausweitung der Rettungsschirme. Beides wird es nicht geben, solange sich die politische und juristische Meinung in Deutschland nicht ändert.

Ich komme daher zu dem Schluss, dass die Wahrscheinlichkeit eines Auseinanderbrechens des Euros seit dem Gipfel eher noch gestiegen ist.
EFSF  ECB  ESM  greatrecession  2012  Eurobond  sovereign  debt  crisis  Europe  EMU  PIIGS  Germany  MarianoRajoy  FrancoisHollande  mariomonti  angelamerkel 
july 2012 by asterisk2a
Euro-Krise: Hans-Werner Sinn ruft zu Protest gegen Bankenunion auf - SPIEGEL ONLINE
Chief of Ifo Institute (Germany) drums up support to protest against Bankunion (EU Banks have 3x debt than Germany already got, Bankunion raises bailout moral hazard and insures continuation of TBTF) and risk of Target-2 balance [Bundesbank] if EMU would break up. Calls for public protest by citizens. EU Summit was first example of power of PIIGS over Core … ala ‘if you don’t agree to that, hell will come’.
sovereign  debt  crisis  bailout  EFSF  Germany  unintended  consequences  politics  target2-system  2012  angelamerkel  PIIGS  EMU  ESM  Ifo 
july 2012 by asterisk2a
Why Germany's TARGET2-Based Eurozone Preservation Mechanism Is Merely A Ticking Inflationary Timebomb | ZeroHedge
Who ultimately pays for TARGET2 losses? Higher inflation part of the bill
...
[T]he important point in the context of the financial risk for Germany from the growing TARGET2 imbalances is that, in the event of a break-up of the Euro area, the price paid would not necessarily be in the form of a massive recapitalisation of the Bundesbank, which could endanger the solvency of the German government itself. Rather, it would come in the form of higher inflation, as Germany faced the financial costs of the Bundesbank’s rising net claims vis-à- vis the other Euro area central banks.

...

Pulling all these data together, we can see a clear shift in the composition of Germany’s net foreign asset position: financial institutions have sharply reduced their exposure to the periphery , while the public sector has increased its claims significantly. The main channel through which this transfer of risk has taken place has been the TARGET2 system.
BIS  Bundesbank  ECB  inflation  greatrecession  GFC  PIIGS  2012  EMU  Europe  sovereign  debt  crisis  Germany  target2-system 
july 2012 by asterisk2a
Is The Swiss National Bank Faking It? | ZeroHedge
if one needs to know the true state of events in Europe, the only real remaining, unmanipulated benchmark remain Swiss nominal bond yields. And at -23.5 bps for the 2 Year it is telling us that nothing is fixed. As usual.

***

The SNB sterilised one half of its FX intervention in May.

"This is highly significant and undermines the credibility of the SNB’s claim that it is willing to do whatever it takes to hold EUR/CHF 1.20. For the floor to be credible the SNB needs to surrender control over the Swiss monetary based, i.e. it has to be willing to deliver both unlimited and unsterilised FX intervention. The intervention in May was certainly unlimited; it most definitely was not unsterilised."

SNB's FX policy is "at odds with the needs of an economy which is growing at 2% p.a, which has no output gap and in which the housing market is overheating and credit growth is becoming problematic."
monetary  theory  monetary  policy  System  inflation  property  bubble  credit  bubble  bubble  BIS  centralbanks  currency-war  capital-flight  capital-controls  foreignexchange  CHF  Switzerland  SNB  2012  sovereign  debt  crisis  EMU  Europe 
july 2012 by asterisk2a
Wie Monti sich beim Euro-Gipfel gegen Merkel durchsetzte - SPIEGEL ONLINE
Nach EU Summit ...

Mit aller Härte und allen Finessen spielte Italiens Regierungschef Monti beim Euro-Poker in Brüssel. Der gewiefte Taktiker und EU-Profi brauchte den Sieg über Kanzlerin Merkel. Sonst wäre es der Anfang von seinem Ende in Rom gewesen.

Italiens Regierungschef hatte gegen den Widerstand der gut situierten Nordländer, angeführt von Deutschlands Kanzlerin Angela Merkel, neue Instrumente gegen die Euro-Krise durchgesetzt. Sie erlauben künftig finanzielle Hilfe aus dem EU-Rettungsfonds, ohne dass die Empfänger sich dafür massive Sparauflagen aufbürden lassen müssen.

Kühles Kalkül mit dem Horror

Gemeinsam tüftelten sie auch eine kleine Erpressung aus. Weder das milliardenschwere Konjunktur- und Wachstumsprogramm, noch die Einführung einer Finanzmarkt-Steuer werde es auf dem Gipfel geben, wenn Merkel nicht bei der Entlastung der spanischen Banken und der Begrenzung italienischer Schuldzinsen mitspiele. Dann scheitere der Gipfel eben total. Mit allen Konsequenzen. ...
EMU  Germany  PIIGS  angelamerkel  ESM  2012  sovereign  debt  crisis  compromise  diplomacy  Spain  Italy  Europe  politics  mariomonti 
june 2012 by asterisk2a
Draghi May Enter Twilight Zone Where Fed Fears to Tread - Bloomberg
European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve.

Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15.
“The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.”

- bc of europes banking problem, contagion, and bank run in the periphery ... NIRP is considered - negative interest rate policy.
- ZIRP changed alot as did QE
- NIRP would make big waves in asset allocation

!!! But does monetary easing help banks and consumers clean up NPL / balance sheet? No!
NPL  economic-thought  economic  history  economic  model  economics  demand  balance  sheet  recession  richardkoo  debtoverhang  monetary  theory  creditcunch  unintended  consequences  psychology  contagion  GFC  greatrecession  2012  Fed  ECB  PIIGS  EMU  bank  crisis  bankrun  System  monetary  policy  ZIRP  NIRP 
june 2012 by asterisk2a
King adds to gloom over UK economy - FT.com
Sir Mervyn King and other Bank of England policy makers warned MPs on Tuesday that the economic situation had deteriorated so severely that they had ripped-up their forecasts of six weeks’ ago.

In some of his bleakest remarks to date, coming soon after weak public finance figures, he cautioned the public not to think Britain was even half-way through the crisis, which started almost five years ago.

Mr King said, “I have no idea what is going to happen in the euro area”.

“It is impossible to imagine a situation in which you just do not know what the situation will be in a part of the world that is close to you and is half of your trade. And that makes it impossible to engage in any sensible forecasting.”
economy  monetary  policy  ZIRP  QE  BOE  politics  policy  folly  policy  error  uncertainty  forecast  academics  academia  economics  economic  history  economic-thought  economic  model  contagion  EMU  Europe  greatrecession  sovereign  debt  crisis  GFC  UK  MervynKing 
june 2012 by asterisk2a
Bundesbank’s Weidmann Says What No Politician Wants to Hear - Bloomberg
“Monetary policy is not a panacea and central bank firepower is not unlimited, especially not in a monetary union,” he said. “We can only win back confidence if we bring down excessive deficits and boost competitiveness. And it is precisely because these things are unpopular that makes it so tempting for politicians to rely instead on monetary accommodation.”
Weidmann hasn’t spared Draghi or Merkel, who has vowed to prevent a breakup of the currency union and put the most money on the line for bailouts and financial backstops.
When European leaders agreed on the fiscal compact championed by Merkel in late January, Draghi said it was “the first step toward the fiscal union” and would “strengthen confidence in the euro area.”
Weidmann said it fell short.
“Obviously in the negotiations, as often in the past, things were watered down,” he said on Feb. 1. “It’s clear that the cornerstone for a real fiscal union hasn’t been laid here.”
PIIGS  sovereign  debt  crisis  policy  error  policy  folly  politics  angelamerkel  Europe  EMU  ECB  monetary  policy  Bundesbank  Jens  Weidmann 
june 2012 by asterisk2a
All the bail-out systems under the sun cannot make the eurozone work - Telegraph
Their costs are 30-40pc out of line with Germany's. It is a fantasy to believe that such a gap can be closed by "reform". Whereas money values can move up with dazzling speed, the real economy can be improved only slowly.
Consequently, when nominal values get out of line, the problem can only be solved by a price or exchange rate adjustment. Theoretically, this could be through internal deflation but that would increase the real value of debt and depress aggregate demand still more. Deflation is the road to catastrophe.

Throwing yet more money at the vulnerable countries and calling this by a fancy name is not an answer. Just as with the Gold Standard and with Bretton Woods, the system has to break.

There will be more summits and bail-outs, more fudge and mudge, and more money poured into a black hole. But the end is approaching inexorably.

Roger Bootle is managing director of Capital Economics.
bailout  2012  Grexit  default  scenario  default  economic  history  brettonwoods  goldstandard  sovereign  debt  crisis  Europe  EMU  Cyprus  PIIGSFB  PIIGS 
june 2012 by asterisk2a
Lethal Embrace? A Thought Experiment | Institute for New Economic Thinking
sovereign debt crisis and the bank crisis, conjoined twins

The problem Europe now faces is that monetary union, a fait accompli, left in place the historical symbiosis between national banking systems and national sovereignties, as well as the pattern of thinking formed by generations of experience with that symbiosis. As a consequence, when the crisis hit, national banking systems stepped in to help their national sovereigns, and national sovereigns stepped in to help their national banking systems.

Both thought they were doing the right thing, based on past experience. But the consequence has been to transform isolated sovereign debt crises into systemic bank crises, and to transform isolated national bank crises into systemic sovereign debt crises.

The deposit and fund outflow out of the periphery is migrating to core Europe. And because of the political backlash over giving up sovereignty, ... a banking union might be the next best.
banking  union  capital-flight  banking  crisis  bank  crisis  angelamerkel  Angela  ESM  EFSF  economic  model  economic-thought  economic  history  ECB  greatrecession  GFC  2012  banking  Europe  EMU  PIIGS  sovereign  debt  crisis 
june 2012 by asterisk2a
"Which Eurobonds?" by Jeffrey Frankel | Project Syndicate
The introduction of Eurobonds – joint, aggregate eurozone liabilities – could be part of the solution, if designed properly. There is certainly demand for them in China and other major emerging countries, which are desperate for an alternative to low-yielding US government securities.
CommentsBut Germany remains opposed on moral-hazard grounds: a joint guarantee of Eurozone members’ liabilities would strengthen individual national governments’ incentive to spend beyond their means. Indeed, this version of Eurobonds would fail, both economically and politically.

But a different version has begun to gain traction in Germany. The German Council of Economic Experts has proposed a European Redemption Fund (ERF). The plan would convert into de facto 25-year Eurobonds the existing sovereign debt of member countries in excess of 60% of GDP.

[But there is still moral hazard left even with this solution .. at the 60% margin.]
PIIGS  Europe  EMU  debtoverhang  history  default  ERF  European  Redemption  Fund  moralhazard  eurobond 
june 2012 by asterisk2a
Too Big to Bail? Spain is Repeating Ireland’s Mistakes | Institute for New Economic Thinking
http://blogs.hbr.org/cs/2012/06/spain_is_now_making_irelands_m.html

“Ireland went bankrupt stopping its banks going bankrupt,” Kinsella and Blyth write. “Spain simply cannot do this even if it wanted to: the problem is too big.”

They recommend several courses of action to prevent an Ireland-style collapse on a massive scale.

***

Spain's property bust (non performing loans and outright losses) on banks (& cajas lead by corrupt politicians) balance sheet is too big to underwrite (underwrite the debt). Spain is economically not able to underwrite all losses from its banks and cajas. And or able to nationalize and inject cash via gov debt with +6% yield. And Europe won't do it either ... I guess.

But 100bn last weekend into from via EFSF/ESM ... nobody knows if it was the last or the first of many.

***

This analysis show again that PIIGS are not all the same with their problems.
2012  EMU  Europe  PIIGS  sovereign  debt  crisis  ESM  EFSF  FROB  moralhazard  cajas  NPL  property  bubble  bubble  property  bankia  Ireland  banking  Spain  bailout 
june 2012 by asterisk2a
Europe’s banks: Slouching towards a banking union | The Economist
Media got wind of the banking problem in Spain via Bankia headlines and its troubles, and thus Spain's troubles, media also covered the capital flight/deposit exodus from PIIGS.

"Almost €100 billion, about one-tenth of GDP, was pulled out of the country’s banks and bond markets in the first quarter."

Yet, Europes (EMUs) banking problem gets much bigger as Europe as a whole is at stall speed and the periphery in yet another year of depression.

"Yet as quickly as banks are filling their existing capital holes, new ones seem to be appearing. Analysts at Nomura note that non-performing loans are rising in several European countries, including Italy and Germany. They reckon that a severe recession in Europe could cost the region’s 90 biggest banks €420 billion in losses and consume about a third of their capital, with big shortfalls in Britain, France and Germany in addition to those already emerging in Spain (see chart)."

Spains 100bnE bailout (into FROB, Spains TARP) is just 1of many.
NPL  confidence  FROB  ESM  EFSF  capital-flight  ECB  EMU  bankia  2012  bailout  greatrecession  banking  PIIGS  Spain 
june 2012 by asterisk2a
Europe's democracies must not subcontract their destiny to the Bundebank - Telegraph
yet another bailout ... now for spanish banks, ... reading between the headlines shows that this bailout is no step out of the fire for southern periphery, but one together into the fire.
EFSF  cajas  2012  ESM  EMU  Europe  bank  crisis  sovereign  debt  crisis  Bankia  Spain  bailout  PIIGS 
june 2012 by asterisk2a
Euro Breakup Precedent Seen When 15 State-Ruble Zone Fell Apart - Bloomberg
History of a Currency Union after end of Cold War & break up of Soviet union.

It was a currency union of 15 states in 1992. Two years later, as budget deficits spiraled out of control, hyperinflation reigned and economies shriveled, just two members of the Soviet Union’s ruble zone were left.

While differences between the Soviet Union and the EU are greater than their similarities, there are parallels that may prove helpful in assessing the debt crisis, historians say. Both were postwar constructs set up in response to a collective trauma; in both cases, the founding generation was dying out as crisis hit and disintegration loomed.

Greece’s departure from the euro bloc would deal a blow ...
BUT
Unions don’t break up because of troubles in peripheral countries, they break up from the core,

Alternative Scenario :: more unification to control out of Brussels offices likely to reawaken the monster of nationalism
Soviet  Union  Ruble  EMU  sovereign  debt  crisis  PIIGS  Grexit  Greece  currency  east-europe  Europe  economic  history  history 
june 2012 by asterisk2a
Draghi's message on how to mend the euro: It's the politics, stupido! | The Economist
Speaking last month when the ECB’s council met in Barcelona, Mr Draghi said that European leaders needed to set out a ten-year vision for the single currency, which would above all signpost how to secure the fragile monetary union with a workable fiscal underpinning. Mr Draghi spelt out today how such a long-term plan might help in the short-term. As was the case with the decisions of European leaders in Maastricht in December 1991 that paved the way to the euro in 1999, there would be a plan with clear deadlines and conditions. Just how important such a road-map was became clear, he said, when the Danes narrowly rejected the treaty in their referendum in mid-1992. By bringing into question the destination, that vote for a time upset the whole process, with interest rates jumping as the markets doubted that the journey would be made.
EMU  Euro  history  mariomonti  FrancoisHollande  sarkozy  angelamerkel  greatrecession  GFC  politics  PIIGS  2012  sovereign  debt  crisis  Europe  MarioDraghi 
june 2012 by asterisk2a
Consequences of a Greek eurozone exit - FT.com
Infographic, audio, about ramifications of Greek exit (Grexit) from European Monetary Union (EMU)

But, as always, the devil is in the details.
EMU  Europe  ECB  PIIGSFB  PIIGS  2012  sovereign  debt  crisis  Grexit  Greece 
may 2012 by asterisk2a
Goldman's Take On TARGET2 And How The Bundesbank Will Suffer Massive Losses If The Eurozone Fails | ZeroHedge
However, central banks in the core countries face one specific risk that can be traced back to the TARGET2 imbalances, and this refers to the possibility that a country might decide to leave the Euro area. In such a scenario, the net claims the remaining central banks have acquired vis-à-vis that country reflect a genuine risk that would not exist without these imbalances. This could in the extreme case of a total break-up of the Euro area, and assuming that the peripheral central banks could not repay their liabilities, mean that the losses would materialise on the Bundesbank’s balance sheet.

It is only if one or several countries were to decide to leave the Euro area that the imbalances would lead to potentially significant losses beyond the risk already reflected in the current generous liquidity provision through the ECB.
ECB  2011  bundesbank  Europe  EMU  break-up 
december 2011 by asterisk2a
Wall Street Journal Lays It Down: "Merkel And Sarkozy Have Lost Credibility" | ZeroHedge
No wonder the markets won't lend and China won't invest in Europe's bailout funds. Nothing these leaders say any longer carries any credibility.
angelamerkel  sarkozy  politics  EMU  Europe  PIIGS  sovereign  debt  crisis  confidence  2011 
november 2011 by asterisk2a
Wikileaks Exposes German Preparations For "A Eurozone Chapter 11" | ZeroHedge
A EUROZONE CHAPTER 11
---------------------

¶9. (C) DB Chief Economist Thomas Mayer told Ambassador Murphy he was pessimistic Greece would take the difficult steps needed to put its house in order. A worst case scenario, says Mayer, could be that Germany pulls out of the Eurozone altogether in 20 years time. In 1990, Germany's Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an "inflationary zone," or 2) the German taxpayer became the Eurozone's "de facto bailout provider." Mayer proposes a "Chapter 11 for Eurozone countries," which would place troubled members under economic supervision until they put their house in order. Unfortunately, there is no serious discussion of this underway, he lamented.
germany  greece  bailout  PIIGS  EMU  wikileaks  cable  cablegate  Europe  Euro  chapter-11  default  2011  politics 
november 2011 by asterisk2a
Bundesbank questions legality of EU bail-outs - Telegraph
Germany's Bundesbank has issued a blistering critique of EU bail-out policies, warning that the eurozone is drifting towards a debt union without "democratic legitimacy" or treaty backing.

"The latest agreements mean that far-reaching extra risks will be shifted to those countries providing help and to their taxpayers, and entail a large step towards a pooling of risks from particular EMU states with unsound public finances," said the bank's August report.It said an EU summit deal in late July threatens the principle that elected parliaments should control budgets. The Bundesbank said the scheme leaves creditor states with escalating "risks and burdens" yet no means of enforcing fiscal discipline to make this workable.
democracy  deficit  angelamerkel  2011  August  bailout  PIIGS  EFSF  ESM  bundestag  germany  constitution  transferunion  europe  EMU  ECB  badbank 
august 2011 by asterisk2a
Euphoria Wanes as Doubts Emerge? | zero hedge
"ad hoc" measures won't address the fundamental challenges arising from economic and political divergence within the bloc of 17 nations that share the euro:

"We are not closer to the end," said Mr. Jen, who was formerly Morgan Stanley's global head of currency research and has worked as an economist at the International Monetary Fund, World Bank and Federal Reserve. Europe needs to become "a United States of Europe, rather than a collection of countries. Obviously, Europe is far from getting to that stage. This is why there will be problems for a long, long time in Europe."

The franc is the "only true safe haven in Europe,"

It is futile to fight these powerful, rotten interests; much better to understand them and try to protect yourself as best as possible as the world sinks deeper into hell.
Europe  sovereign  debt  crisis  bubble  EMU  ECB  trichet  PIIGS  politics  fraud  accountability  lobby  lobbyist  Lobbying  wallstreet 
july 2011 by asterisk2a
Italy and Spain must pray for a miracle - Telegraph
Italian 10-year bonds hit a post-EMU high of 5.3pc on Friday. This is not just a theoretical price: the Italian treasury has to roll over €69bn (£61bn) in August and September; it must tap the markets for €500bn before the end of 2013. The interest burden on Italy's €1.84 trillion stock of public debt is about to rise very fast.Spanish yields punched even higher, through the danger line of 5.7pc. The bond markets of both countries are replicating the pattern seen in Greece, Portugal, and Ireland before each spiraled into insolvency. And the virus is moving up the European map. French banks alone have $472bn (£394bn) of exposure to Italy and $175bn to Spain, according to the Bank for International Settlements."We believe the European sovereign crisis might be entering a new phase with contagion reaching the larger economies

M1 contracted  m-o-m over the past two months, with sharper declines in the periphery.  2.9% March 1.6% April 1.2% May. M3 grew +2.2 % months.
italy  spain  PIIGS  2011  sovereign  debt  crisis  EMU  europe  moneysupply  ECB  trichet 
july 2011 by asterisk2a
Danish Border Controls Shake EU Foundations
TEST OF TIMES

It was Rome and Paris that first announced they would partially reintroduce border controls. The reason was negligible, and the step was motivated purely by politics. Around 30,000 refugees from North Africa had landed on the coasts of Italy and Malta. By comparison: During the 1990s, more than 100,000 refugees fled from Kosovo to Europe, but nobody at the time threatened to dispose of the right of Europeans to border-free internal travel.
Europe  PIIGS  lybia  sovereign  debt  crisis  confidence  politics  2011  EMU 
july 2011 by asterisk2a
Why Germany must exit the euro - Telegraph
German policymakers should take a pragmatic look at the situation. On the one hand the only way to save the euro (without forcing out the Mediterraneans) is to make it a transfer union. They would have to absorb enormous long-term costs to support their weaker siblings – either in terms of inflation or simple cash transfers. It would be a slow-motion long-term bail-out of even greater scale than the recent emergency infusions. And even this does not rule out the short-term prospect of default.

The sticking point is politics, but even there the debate is shifting. German politicians are loath to be portrayed as the destroyers of the European project, but this could easily be outweighed by the public reaction when Germans realise what they will have to pony up to keep the ship afloat. The French would be dismayed at the idea – after all the raison d’etre of the euro project was to feed off the German economic “miracle”. And if Germany leaves, does France stay or go?
PIIGS  EMU  EU  sovereign  debt  ECB  IMF  germany  economics  economy  2011  bailout  Greece  competitiveness  competitive  export  angelamerkel 
june 2011 by asterisk2a
European Central Bank risks being 'wiped out' by bail-outs - Telegraph
The European Central Bank is "looking increasingly vulnerable" and may face "hefty losses" as a result of propping up indebted eurozone countries, a leading think-tank has warned.

In a report published on Monday entitled A House Built on Sand?, Open Europe has calculated that the ECB has a total exposure of about €444bn (£397bn) to "struggling eurozone economies".The bank is now "23 to 24 times levered" as a result of bailing out Greece, Ireland, Portugal and Spain.The London-based think tank argued: "Should the ECB see its assets fall by just 4.23pc in value . . . its entire capital base would be wiped out."Open Europe said: "Hefty losses for the ECB are no longer a remote risk." It added: "The ECB is ultimately underwritten by taxpayers which means there is a hidden – and potentially huge – cost of the eurozone crisis to taxpayers buried in the ECB's books."

"The ECB is backed by all the central banks in Europe, as well as taxpayers."
ECB  PIIGS  2011  trichet  EMU  sovereign  debt  crisis 
june 2011 by asterisk2a
World on course for next crisis, warns Gordon Brown - Telegraph
Mr Brown said the "resolve" to act seen immediately after the crisis has been replaced by indecision and vested interest. He urged politicians at the next G20 summit, which takes place in Cannes in November, to take control of a globalised financial system which is still "perilously" unregulated.

They fear "with good cause" that if Greece has to restructure its debt - effectively default - it could unravel a chain of trades based on the problematic debt and lay bare the interconnectedness of institutions around the world, said Stephen Lewis, an analyst at Monument Securities.
gordonbrown  2011  PIIGS  default  restructuring  greece  banking  EMU  lehmanbrothers  finance  financialcrisis  FinancialCrisisInquiryCommission  toobigtofail 
may 2011 by asterisk2a
The Unwisdom of Elites - NYTimes.com
Does any of this matter? Why should we be concerned about the effort to shift the blame for bad policies onto the general public?
One answer is simple accountability. People who advocated budget-busting policies during the Bush years shouldn’t be allowed to pass themselves off as deficit hawks; people who praised Ireland as a role model shouldn’t be giving lectures on responsible government.
We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.
paulkrugman  europe  EMU  USA  politics  policy  accountability  blamegame  sovereign  debt  PIIGS  greatrecession 
may 2011 by asterisk2a
Head Of Eurogroup Admits To Lying About "Secret Greek Meeting" Out Of Fears For Market Collapse - "When It Becomes Serious, You Have To Lie" | zero hedge
On the tape, Mr. Juncker says he has “had to lie” and, speaking about touchy economic topics, “When it becomes serious, you have to lie.”
EMU  Europe  Euro  PIIGS  greece  2011  sovereign  debt  politics  economics  default  restructuring  ireland  portugal  EFSF  ESM  ECB  Fed  fraud 
may 2011 by asterisk2a
ECB Raising Rates May Turn Into Mistake Weakening Euro, Standard Life Says - Bloomberg
“The euro is a particularly risky currency at these levels because the increasingly restrictive policy and the financial conditions are not really appropriate,” Dickson said in an interview. A series of rate increases “is not appropriate for the conditions or economics of Europe as a whole,” he said.
Investment strategists at Standard Life, Aberdeen Asset Management Plc and Scottish Widows Investment Partnership said last month that the biggest risk to markets was the possibility of policy makers getting decisions wrong. While ECB President Jean-Claude Trichet said this month’s quarter-percentage-point increase in the main refinancing rate wasn’t necessarily the start of a series, colleagues signaled more are to come.
lostdecade  Japan  history  ECB  trichet  PIIGS  2011  divergence  germany  inflation  monetary  policy  EMU  Euro  europe 
april 2011 by asterisk2a
Bonello Urges ECB Caution in Raising Rates as Most-Indebted Nations Suffer - Bloomberg
European Central Bank council member Michael Bonello said policy makers mustn’t raise interest rates at the expense of economic growth in debt-strapped euro- area nations if inflation expectations remain contained.

“The sovereign debt crisis is not yet behind us, and the banking sector in some countries -- which is a key to finding a solution to the crisis -- is still very fragile,” Bonello said. “We could still see an accentuation of the negative feedback loop from the financial sector to the real economy via the sovereign debt channel. The risks to growth could well be tilting to the downside.”

----

caution not to repeat same mistake Japan made.
“In uncertain circumstances like these, we need to balance doctrine with pragmatism,” Bonello, who heads the Central Bank of Malta, said in an April 15 interview in Valletta. “We must be careful not to make it more difficult for countries to grow out of their debt problem.”
ECB  europe  japan  lostdecade  history  recovery  PIIGS  comparison  sovereign  debt  risk  trichet  Axelweber  germany  inflation  monetary  policy  EMU  banking  contagion 
april 2011 by asterisk2a
Banks to Face Sovereign Debt Scrutiny in European Regulator's Stress Tests - Bloomberg
European regulators will scrutinize banks’ calculations for losses on sovereign debt held to maturity when carrying out this year’s stress tests, Europe’s top banking supervisor said.
Financial watchdogs will “check what banks are doing with reference to some sovereign exposures and see whether they’re taking a conservative attitude” when valuing the assets, Andrea Enria, the chairman of the European Banking Authority, said in an interview in London.
stresstest  europe  2011  sovereign  debt  PIIGS  EMU 
april 2011 by asterisk2a
Eurozone ship is on the course that was set for it: heading for the rocks - Telegraph
Two events last week saw the crisis in the eurozone deepen - the Portuguese bail-out and the ECB's interest rate increase. But much more is brewing.

Debt is one facet of the euro's crisis. There are three others.
The second factor is the property market.
The third factor is the weakness of the banks.

The euro is supposedly cemented by unshakeable political will. Yet not only has the eurozone failed to establish workable union-wide political institutions, but the political situation in member countries has turned ugly.Portugal and Belgium are without governments.
ECB  PIIGS  contagion  2011  bailout  EFSF  ESM  banking  europe  EMU 
april 2011 by asterisk2a
One size fits all Eurozone is set for total failure | City A.M.
DB analysts gave interest rate of 3.4% for Germany as reference. 

Given the fragile state of the region, why did Trichet hike rates? Simple: the ECB’s mission is to stop inflation. The March estimate showed Eurozone prices increasing by 2.6 per cent in March, well ahead of the ECB’s inflation target. The ECB was especially worried about evidence of upward pressure on German wages.
Germany’s economy is booming, with GDP increasing 3.5 per cent in 2010. Yet the Irish economy contracted by 1.6 per cent in the final quarter of 2010 and is forecast to grow by less than one per cent this year. The outlook for Greece is worse: GDP shrunk by 3.9 per cent last year. The situation in Portugal is grim. It makes sense to hike rates in Germany. But it makes no sense to do so in Portugal or Ireland. Because of the euro’s one size fits all interest rates, the periphery countries are being sacrificed.
trichet  ECB  2011  germany  ZIRP  EMU  divergence  faultlines 
april 2011 by asterisk2a
Prepare for a European Union Divided in Two - WSJ.com
The American colonies went to war to break away from  First, the 27-nation European Union will have fractured into separate groups of 17 and 10. Second, the economies of the Gang of 17 will be centrally managed by a Franco-German coalition, while the nations among the 10 "leftovers" will fight a losing battle to effect the policies of the EU of which they are paid-up members. Peaceful coexistence between the 17 and the 10 is no sure thing.

Those differences between the 17 and the 10 are creating a threat to the cohesion of the 27-member European Union. The euro-zone countries are developing rules for coordinated economic management without consulting the excluded group of 10. ...

Britain, and fought under the banner, "Taxation without representation is tyranny." The excluded 10 will have to decide just how long they want to tolerate marginalization before deciding that regulation without representation is equally tyrannical.
europe  2012  UK  regulation  reform  EMU 
march 2011 by asterisk2a
Greece Successfully Rescued From Abyss, EU, IMF Say - Bloomberg
Greece’s economy has been rescued from the “abyss” as austerity measures aimed at restoring order to public finances “are being implemented as planned,” the European Union and International Monetary Fund said.
“While there have been some delays and shortfalls, it should not undermine the fact that the program is broadly on track,” Poul Thomsen, head of the IMF’s Greece mission, told a news conference in Athens today. “We are ready for the second phase of the program, having successfully pulled the economy from an abyss.”
IMF  EMU  Greece  2011  bailout  austerity 
february 2011 by asterisk2a
Bundesbank-Chaos: Derselbstverschuldete Abstieg des Axel Weber - SPIEGEL ONLINE - Nachrichten - Wirtschaft
Unschöne Affären, Skandale oder politisch unkorrekte Äußerungen sind es meist, die Spitzenmanager zu Fall bringen. Doch bei Axel Weber war es völlig anders. Der noch amtierende Bundesbank-Chef stand sich selbst im Weg. Weil er seine Fachkenntnis nicht für sich behalten konnte - ausgerechnet.
Obendrein liefen die Karrierepläne des Bundesbank-Chefs seit längerer Zeit nicht mehr so gut wie früher. Das mag daran gelegen haben, dass Weber bei seinem geplanten Aufstieg nicht genügend Rückhalt aus Berlin hatte. Aber vor allem auch daran, weil sich der 53-Jährige als geldpolitischer Hardliner selbst im Weg stand.
Axelweber  2011  ECB  EMU  ZIRP  inflation  PIIGS  bailout 
february 2011 by asterisk2a
EU Leaders Clash at Summit - WSJ.com
BRUSSELS—Sharp disagreements opened up among European Union leaders at a summit here over a German-led plan to boost the competitiveness of weaker euro-zone economies, threatening to unsettle recently calm European financial markets.
The German proposals, backed by France, are viewed as the price for an agreement to expand a bailout fund for the struggling economies of the euro zone and give the fund greater powers to stem the region's debt crisis—a move seen as critical to restoring confidence in the euro.
EFSF  2011  angelamerkel  sarkozy  competitiveness  politics  EMU  Europe  PIIGS 
february 2011 by asterisk2a
Merkel Turns Crisis into Opportunity to Reshape Euro Zone - Bloomberg
Germany’s message is “we don’t care about pain and the only solutions are austerity and structural reforms, and anything else has to wait for 2013,” when the EU aims to have a permanent defense system for the euro in place, said Roubini. “You need a more comprehensive solution sooner.”
Most international investors predict at least one of the 17 nations will leave the euro area within five years and that Greece and Ireland will default, according to the January 2011 Bloomberg Global Poll that underscored the urgency leaders face in calming markets. The same poll ranked Merkel as the most favored of nine global policy makers.
germany  greece  unemployment  economy  EMU  2011  angelamerkel  sarkozy  leadership  Europe  Euro  EFSF 
february 2011 by asterisk2a
Bailouts Test Limits of Taxpayer Tolerance: Karl Heinz Daeke - Bloomberg
What does that mean for Germany? We are on the brink of a transfer union, where huge amounts of money are channeled from richer to poorer countries. And Ireland isn’t even poorer than Germany. According to the International Monetary Fund, Ireland’s gross domestic product per capita is about 35,000 euros ($47,000), higher than Germany’s 31,000 euros. Taking purchasing power into account doesn’t change anything.

So, German taxpayers will guarantee the repayment of about 12.5 billion euros lent to Ireland.

When Jean-Claude Trichet steps down as ECB president next year, the appointment of a German candidate as his successor would be good news. That would give some reassurance to taxpayers that the debt crisis won’t be “solved” by massive inflation.
Anything else will only test the tolerance of German taxpayers.
EFSF  EFSM  angelamerkel  politics  Germany  PIIGS  Ireland  EMU  Axelweber  trichet  ECB  sovereign  debt  2010  2011 
december 2010 by asterisk2a
Trichet Calls for `Maximum' Flexibility of Aid Fund - Bloomberg
""Council member Ewald Nowotny said on Dec. 10 that
ECB buys bond, ECB needs money for that. That money is provided by the individual central banks from the EMU countries respective their size.""

""If Portugal and Spain needs help, EMU countries either have to expand the fund (EFSF) or prop up the ECB that they can buy up periphery bonds to dampen high rise bond spreads ... so that they can finance themselves at reasonable rate from the market.

- European central banks have been forced to take on “a whole range of extra risk” and may need more capital. Trichet said he has “no particular comment” on the topic. Vice President Vitor Constancio said on Dec. 10 that an increase of the rescue fund and more flexibility would be “helpful.”""
ECB  EFSF  EFSM  politics  europeanunion  EuropeanCommission  europe  EMU  Germany  trichet  2010 
december 2010 by asterisk2a
European Debt Crisis Is Shaped by Bond Vigilantes - NYTimes.com
Disagreements among national governments have made it difficult to address the core problem, which, he said, is “not lack of liquidity, but of solvency” — that is, not a matter of providing enough cash for short-term operations, but of reducing debt ratios that are simply too high to be managed. Solving the problem anytime soon would require “haircuts” — write-downs or restructurings, in which bondholders would, in the end, have to take some losses.
sovereign  debt  PIIGS  monetary  fiscal  policy  ecb  trichet  greece  ireland  2010  response  politics  angelamerkel  EMU  EuropeanCommission  europe  herding  herd  crisis 
december 2010 by asterisk2a
One from the files | afoe | A Fistful of Euros | European Opinion
idea that we are headed for a world of increased official capital flows, with political conditions attached. With Klaus Regling, CEO of the European Financial Stability Facility, telling us just now that he’s been shopping the EFSF fund-raising to sovereign wealth funds and central banks, we could be getting into a world of Asian/petrodollar flows, via Brussels, Washington, and Frankfurt, to the European periphery.
EFSF  Ireland  2010  Spain  petrodollars  Asia  China  Greece  EMU  PIIGS  politics 
november 2010 by asterisk2a
Lehren aus der Schuldenkrise: Trichet warnt vor EU-Vertragsnderung | FTD.de
ein neuer Rettungsschirm für Euro-Länder im Vertragswerk verankert werden. Auch private Investoren sollen an den Kosten beteiligt werden. Der EZB-Präsident warnt im Kreis der EU-Staats- und Regierungschefs: Anleger könnten im Gegenzug deutlich höhere Zinsen verlangen.

Deutschland und Frankreich wollen erreichen, dass private Anleihegläubiger und Investoren stärker an den Kosten solcher Rettungsaktionen beteiligt werden. Damit sollen die Steuerzahler entlastet werden, die zum Beispiel einen Großteil der Hilfen für Griechenland stemmen.

warnte Trichet die Staats- und Regierungschefs am Donnerstag jedoch vor einem solchen Schritt. Die Anleihemärkte könnten aufgeschreckt werden, wenn die Politik ihnen das Signal gebe, sie könnten bei Umschuldungen stärker belastet werden, Investoren würden dann höhere Zinsen von Ländern wiePIIGS verlangen, die ohnehin um das Vertrauen der Märkte kämpfen müssen.
EFSF  trichet  ECB  EMU  EuropeanCommission  europeanunion  2010  bailout  PIIGS  sovereign  debt 
october 2010 by asterisk2a
European Union Plans System for National Debt Crises - NYTimes.com
European leaders tried to bridge the differences over how to structure a new rescue mechanism. Determined to include the principle of moral hazard, Germany, Europe’s biggest economy, is actively pushing for a system in which bondholders would absorb some of the risk.

But Mr. Trichet argued that such a system would scare investors and drive up short-term borrowing costs for weaker nations, thus endangering their recovery.

“The president of the European Central Bank has the view that he wants to do everything to ensure that markets take a calm view of the euro zone,” she said. “We are also interested in that, but we also have to keep in mind our people, who have a justified desire to see that it’s not just taxpayers who are on the hook, but also private investors.”

“I don’t quite share Jean-Claude Trichet’s concern,” she added.

The toughest task now falls to the European Commission, which must create the new, permanent rescue mechanism to deal with sovereign debt emergencies.
EMU  reform  2010  europeanunion  EuropeanCommission  sovereign  debt  PIIGS  bailout 
october 2010 by asterisk2a
Europe's future: Can anything perk up Europe? | The Economist
The single market remains half-built. The EU is 30% less productive than America in services. Because European services companies operate behind national barriers they innovate less and they tend not to gain the full economies of scale. Whole areas, such as health care, are exempted from EU-wide competition. Likewise some high-tech industries, such as telecoms, have been protected and others, such as e-commerce, barely existed in 1992. A single digital market could be worth 4% of EU GDP by 2020. The EU has a costly, fragmented patent system, so products (like far too many workers) cannot cross borders easily; energy supply has not been properly liberalised; debts are hard to collect across borders. And so it goes on. National to-do lists are just as long. In Spain and Italy privileged workers are protected, discouraging new permanent jobs. German entrepreneurs are immediately taxed on equity they put into a start-up. Europeans retire too early everywhere.
europe  free-market  germany  protectionism  startup  outlook  politics  EMU  2010  2011  2012  problem  problems 
july 2010 by asterisk2a
The future of Europe: Staring into the abyss | The Economist
While still grumbling about unfounded rumours in financial markets (and he has a point), a more realistic Mr Zapatero argued: “There is nothing better than transparency to demonstrate solvency.”

Mr Zapatero reversed course, announcing civil-service pay cuts and other austerity measures. He unveiled a (modest) plan to ease Spain’s rigid labour laws, which make older workers almost unsackable, leaving young and immigrant workers on temporary contracts to take the pain when Spain’s property-led boom turned to bust. At 40%, youth unemployment in Spain is not just high; it is a moral indictment of an entire system.

Between 2005 and 2030 the working-age population of the European Union will shrink by 20m, and the number of those over 65 will increase by 40m.
Europe draws the right lessons from this crisis. An open, flexible, competitive EU offers Europeans the best chance of confronting globalisation.
Big choices loom.
Europe  EMU  june  july  2010  transparency  EuropeanCommission  europeanunion  eurozone  spain  aging  demographics  pension  structure  demography  greece  PIIGS  germany  france 
july 2010 by asterisk2a
ECB Official Stark Slams IMF View of Europe - Real Time Economics - WSJ
“We see a bias that the IMF has not caught up with the reality in Europe, taking into account the last data we have seen,”

Earlier this week, the IMF said Europe faced “heightened uncertainty” related and its exposure to sovereign risk, as well as higher funding costs. It warned that negative spillovers from Europe to other regions “could be substantial because of financial and trade linkages.”

The IMF said in an update of its World Economic Outlook that downside risks to the global economy had “risen sharply” and that “in this context, the new forecasts hinge on implementation of policies to rebuild confidence and stability, particularly in the euro area.”

“The IMF is underestimating the strength of the recovery in Europe,” Stark said. On Thursday, ECB President Jean-Claude Trichet criticized what he sees as a tendency from “the outside” to be “excessively pessimistic” about the euro zone’s prospects, though he didn’t single out the IMF or anyone else.
IMF  ECB  trichet  EMU  Europe  sovereign  debt  july  2010 
july 2010 by asterisk2a
William Hague: „Wir wollen nicht, dass der Euro scheitert“ - Ausland - Politik - FAZ.NET
Hague gebrauchte Formulierungen wie „durchsetzungswillig“ und „begierig, sich zu engagieren“ für das europapolitische Engagement Großbritanniens unter seiner Verantwortung. Er beharrte darauf, die Konservativen hätten in den Koalitionsverhandlungen mit den Liberaldemokraten wesentliche Punkte ihrer europapolitischen Vorstellungen durchgesetzt. So würden künftig Volksabstimmungen über alle EU-Verträge gesetzlich vorgeschrieben, die weitere nationale Souveränitätsrechte an die Europäische Union verschöben. Außerdem habe sich die Koalition geeinigt, in der laufenden Legislaturperiode auf keinen Fall einen Beitritt zum Euro zu erwägen.

erlage führte, verkniff sich nun in Bezug auf die Lage der Gemeinschaftswährung jeden Anflug eines schadenfrohen Lächelns. Stattdessen sprach er von der Bedeutung einer „gesunden Euro-Zone“ für die britische Wirtschaft: „Wir wollen nicht, dass der Euro scheitert.“
euro  uk  davidcameron  germany  angelamerkel  westerwelle  FDP  EMU  Europa  2010  2011  2012 
june 2010 by asterisk2a
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