The latest bit of euro fantasy has been that a few changes in the top personnel would transform matters. Yet even if you installed a coalition of Pericles and Alexander the Great in Athens and Cesare Borgia and the Emperor Hadrian in Rome it wouldn't make a blind bit of difference. What ails these countries is the irresistible arithmetic of the debt trap. The idea of a euro break-up frequently meets with the objection that this would crucify German industry. This is nonsense. The new German currency would certainly go up, I grant you. Indeed, it would need to; that is a key part of the adjustment mechanism. But it would not go up without limit. The Germans were reluctant to give up their Deutschmark which, they said, had been the secret of their post-war success. And now they are reluctant to give up the euro which, they say, is the secret of their post-Deutschmark success! In fact, German business proved immensely good at bearing the strains created by a strong D-mark and it would again be like this under the "son of D-mark". Anyway, what German business wants should not be the sole arbiter. A high German exchange rate would transfer income within Germany from businesses to consumers and this would help to boost consumer spending. Trying to keep the euro going is like trying to breathe life into a corpse. Europe's leaders should not be propping the single currency up, like El Cid strapped to his steed, but rather preparing to dismantle it at the lowest possible cost. Trying to keep the euro going is like trying to breathe life into a corpse. Europe's leaders should not be propping the single currency up, like El Cid strapped to his steed, but rather preparing to dismantle it at the lowest possible cost.
Access Investments-Building Awareness - European Union-ROMANIA
Sunday, November 13, 2011
Trying to keep the euro going is like trying to breathe life into a corpse.
The latest bit of euro fantasy has been that a few changes in the top personnel would transform matters. Yet even if you installed a coalition of Pericles and Alexander the Great in Athens and Cesare Borgia and the Emperor Hadrian in Rome it wouldn't make a blind bit of difference. What ails these countries is the irresistible arithmetic of the debt trap. The idea of a euro break-up frequently meets with the objection that this would crucify German industry. This is nonsense. The new German currency would certainly go up, I grant you. Indeed, it would need to; that is a key part of the adjustment mechanism. But it would not go up without limit. The Germans were reluctant to give up their Deutschmark which, they said, had been the secret of their post-war success. And now they are reluctant to give up the euro which, they say, is the secret of their post-Deutschmark success! In fact, German business proved immensely good at bearing the strains created by a strong D-mark and it would again be like this under the "son of D-mark". Anyway, what German business wants should not be the sole arbiter. A high German exchange rate would transfer income within Germany from businesses to consumers and this would help to boost consumer spending. Trying to keep the euro going is like trying to breathe life into a corpse. Europe's leaders should not be propping the single currency up, like El Cid strapped to his steed, but rather preparing to dismantle it at the lowest possible cost. Trying to keep the euro going is like trying to breathe life into a corpse. Europe's leaders should not be propping the single currency up, like El Cid strapped to his steed, but rather preparing to dismantle it at the lowest possible cost.
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Writing in the Observer, Barroso makes a rare intervention in the UK political debate by warning that all members of the EU need to unite and "advance together".
Citing Remembrance Sunday, he warns that "actions have consequences" and claims that peace and prosperity will best be furthered by Europeans supporting and trusting EU institutions, rather than allowing the continent to fragment politically and economically. He writes: "In this defining moment, we either unite or face irrelevance. Our goal must not be to maintain the status quo, but to move on to something new and better," adding: "I hope when historians look back on these unprecedented times, they will understand that we stepped back from the brink of fragmentation. I hope they will see how the UK fully engaged with fellow member states and institutional partners to ensure the stability of the EU."
After a tumultuous week in Europe that saw Italy pushed to the brink of meltdown, Barroso's strongly worded intervention underlines the depth of anxiety in Brussels about the future of the single currency and the EU.
Reports emerged, after a brutal sell-off in bond markets sent Italy's borrowing costs soaring, that France and Germany had discussed the idea of a smaller eurozone, with weaker states such as Greece encouraged to leave, and the inevitable creation of a two-tier EU.
There have also been renewed calls from the Eurosceptic wing of the Conservative party for the UK to partly or totally withdraw from the EU, culminating last month in 81 Conservative MPs defying a three-line whip to vote against the government and in favour of a referendum on membership
EU internal market commissioner Michel Barnier, fired a shot across the bows of the dominant US trio of agencies after the hugely embarrassing error committed by Standard & Poor's on Thursday, when it issued a downgrade of French sovereign debt by mistake.
Barnier, who will unveil his plans on Tuesday, said pointedly that they would create a European framework for civil liability "in the case of serious misconduct or gross negligence" indicating that this was especially relevant in the current case.
"This incident is serious and shows that in the current tense and volatile market situation, market players must exercise discipline and demonstrate a special sense of responsibility," he said. "This is all the more important since we are not talking about just any market player but one of the biggest rating agencies."
The EU has been gunning for the agencies – S&P, Moody's and Fitch since the financial crisis of 2008, with anger coming to a head last year when Greek debt was downgraded during tense negotiations on the country's first €110bn bailout.
The third assault on their pre-eminence in as many years will be three-pronged. First, customers will be forced to change agency every three years, or after 10 consecutive bond issues, and not return to the same one for four years.
Barnier has dropped plans for the EU to, in effect, create its own agency, but views mandatory rotation as a means of supporting the newer, smaller ones – such as Euler Hermes – while they establish their credibility.
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