Jean-Claude Juncker’s view that the euro is “dangerously high” isn’t shared by the European Central Bank (ECB). As long as this is the case, the single currency may continue to defy fundamentals and act as an unwelcome headwind for an economy still struggling to break out of recession. (more…)
Most peripheral euro-area countries have significantly improved their competitiveness recently, but more needs to be done. With currency devaluation ruled out, further downward pressure on labor costs is likely, which will probably deepen and prolong recessions and interfere with fiscal adjustment. (more…)
Even by the standards of the sovereign-debt crisis, the provisional agreement reached yesterday by euro-area finance ministers and the International Monetary Fund (IMF) on a second Greek rescue package looks like a messy fudge. It is clear that Greece’s euro-area partners are determined to avoid a near-term euro-area exit, but a long-term solution will require a much more effective growth strategy. (more…)
Despite the Greek government’s best efforts, last night’s meeting of euro-area finance ministers failed to approve the release of new funding. We think it’s only a matter of time before Greece gets its money. But the latest delay reflects deep disagreement about how to reduce current unsustainable debt levels. Until the euro area addresses this key issue, caused by the failure of the Greek program, the risk of a disorderly exit from the euro area will remain real. (more…)
Capital flight from Spain is accelerating. As foreign investors and banks pull massive sums out of the country, policymakers look powerless to stop it.
The European Central Bank (ECB) has raised the prospect of a more effective bond-purchase programme. Unfortunately, it may require additional market pressure for governments to unlock that support.
European Central Bank Governor Mario Draghi has raised expectations ahead of this week’s ECB Governing Council meeting. (more…)
Germany may have the strongest economy in the troubled euro area, but the euro has not been a massive “free lunch”, as some critics claim. Germany’s strength has come at the cost of many painful years of sacrifice. (more…)
Today, New Democracy (ND) leader Antonis Samaras will try to form a government. If he succeeds, an immediate disaster scenario will have been avoided. The question is: for how long? (more…)
As Greek voters prepare to go to the polls on Sunday, we are approaching a pivotal stage in the sovereign-debt crisis—and, perhaps, in the post-war history of European economic and political integration. (more…)