It has been clear for some time that the euro is overvalued and not just by a
little bit as suggested by Wolfgang Schauble.
I think that we are talking a 20-30% devaluation to save club med and keep
them in the EZ. Germany of course would end up with high inflation. I cannot see dropping interest rates a little bit will have much effect.
Quantative easing might be difficult as this increases liquidity and there is
too much money squishing around in the EZ already. The situation in the EZ is now so bad that drastic action is necessary to
correct it. What sort of action can replace breaking up the whole sorry thing is
beyond me.
It is worth pointing out again that Germany is only 27% of the EZ. EZ
economics need to be aimed at the remaining 73%. If you make economic policy
that only benefits Germany then you should expect the rest of the EZ to be in
the state that it is.
As to why the euro is so overvalued, I am as at much a loss as everybody
else.
I do however suspect that ECB operations are at the root of things. Their
sole objective is to keep prices down which is mainly due to German fears of
hyper-inflation. The problem is that playing artificially with one part of the
economic equation has a knock on effect with rest of the equation.
I fear that the economic equation in the EZ is now so far out of kilter as to
be uncorrectable.
The pain and suffering in the EZ will continue until it is broken up, either
partly or wholly, and the disparate economies allowed to recover via traditional
means.
I would like to say this to the europhiles. Your stupid project has caused
this problem. All across europe the people are suffering as a result of your
hubris. This cannot be allowed to continue. The day of your reckoning is
coming. You have been warned......
3 comments:
“Breaking: Two Explosions in the White House and Barack Obama is injured,” said the fake “alert” from one of America’s most trusted news sources, briefly fooling some news outlets and sending the Dow Jones plunging 145 points in the space of two minutes — or 1pc.
The benchmark S&P 500 index also fell nearly 1pc in the space of three minutes as the tweet hit the markets. With the S&P valued at roughly $14.6 trillion at the moment of the false tweet, that three-minute plunge briefly wiped out $136.5bn (£92.2bn) of the index's value, according to Reuters.
The Greek government has pledged to pursue a claim against Germany for war reparations following the Greece occupation of 1941-1944.
Greek foreign minister Dimitris Avramopoulos told MPs in parliament today that an official inquiry into the issue had now issued a report, after a long trawl through the archives. The government's lawyers will now decide how to proceed, and press the case.
The move is likely to further hurt relations between Athens and Berlin, as the German government has insisted that the issue will not be reopened. That, though, hasn't prevented many Greek politicians from pushing the issue.
Reuters has more details:
Avramopoulos did not not say how much would be sought.
"We will exhaust every means available to arrive to a result," he told lawmakers. "One can't compare the times, but also not erase the memories."
Germany, whose forces occupied Greece in World War Two, says it has already paid all reparations owed.
The issue has resurfaced since last year as Greece suffers under austerity measures imposed on it by its creditors, mainly Germany, as a condition for its international EU/IMF bailout.
Avramopoulos said it was wrong to link the issue to the debt crisis.
"This has been an open issue for 60 years, it is too large an issue to fit into the confines of the fiscal crisis," he said.
Reaction to Enrico Letta's appointment
Here's some early reaction to the news that Enrico Letta has been named as Italy's next prime minister:
Open Europe, the think tank, wrote:
The choice made by 88-year-old Napolitano addresses the Italian electorate's call for a rejuvenation of the political system. This is significant in the 'old vs young' struggle that has characterised Italian politics recently.
In light of his appointment as Prime Minister, we would now expect politicians rather than technocrats to grab ministerial posts - although we can't rule out the involvement of a couple of technocrats in the new cabinet.
However, make no mistake: this move doesn't wipe out the deep divisions among the main political parties, and whatever shape the government takes, it won't be easy for Italy to continue with the reforms that the eurozone demands.
Robert O’Daly, Italy analyst at The Economist Intelligence Unit.
The established parties are unsurprisingly acquiescent. Considered unthinkable just a few weeks ago, the PD has agreed to participate in government with Silvio Berlusconi's centre-right Popolo della Liberta'.
However, it remains to be seen how long this government of national unity will last. The PD is going through a period of internal turmoil, while opinion polls show that Mr Berlusconi's party has continued to recover lost ground since the general election. At some point in the not too distant future he could decide to withdraw from his party's support, triggering an early election which he would have a better chance of winning this time round.”
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