In a radical policy shift, the European Commission has called for the creation of a “banking union” that can centrally oversee and if necessary bailout the banking sector. As concerns over Spain’s financial health continue to grow, the policy shift would allow the banking union to share the burden of bank failures, without having to go through national governments.
As European leaders scramble to find remedies for a debt crisis that is threatening to spiral out of control, hedge fund managers in the United States have been finding ways and means to profit from Europe’s troubles. According to fund managers interviewed by Reuters, “there are a multitude of strategies to play Europe’s troubles, and many different participants.”
As recently as six months ago, one didn’t discuss in polite company in Madrid the possibility that Spain would leave the euro and restructure its debt. The prospect was unthinkable and like many unthinkable things it could not be discussed. But perhaps things have changed. If responsible policymakers, advisors, the press, and public intellectuals are indeed discussing and debating the future of the euro now, a real and open debate about Spain’s prospects will quickly move the consensus towards abandoning the euro.
With François Hollande’s defeat of Nicolas Sarkozy, Merkel has virtually no support left in the eurozone. As the world looks for signs that Europe’s new power duo can overcome political difference and work together to save the euro, almost all European governments are counting on Hollande to change the balance of power. Will he succeed?
Head of the International Monetary Fund, Christine Lagarde, has warned that the consequences of Greece exiting the euro would be “extremely expensive and hard, and not just for Greece.” While the impact would be hard to predict, Lagarde said the IMF has to be “technically prepared for anything”.
As talks to form a coalition government collapsed in Greece, Lagarde revealed that the IMF has conducted a technical assessment of a possible Greek exit from the euro.
In an interview with a Dutch public television broadcast, she said:
Members of the European Union have agreed on how to write new global rules for safer banking, after months of bitter clashes between Britain and the rest of the Union. The rules, based on standards set by Basel III, aim to increase financial stability by making banks better equipped to managed their risks and absorb shocks similar to those of the last few years.
On the back of strong export growth in Germany, the 17-nation eurozone currency bloc has managed to narrowly avoid recession in the first three months of the year.
The European Union statistics agency, Eurostat, announced today that growth in the eurozone was zero percent in the first quarter of 2012, helped by Germany’s better than expected economic performance.
Expanding at 0.5 percent for the same period, Germany helped the euro area avoid its second recession in three years, cementing hopes that Europe’s largest economy can underpin the eurozone.
Europe’s single-minded focus on austerity is a result of a misdiagnosis of its problems; and the fact that so many economies are vulnerable to natural disasters only makes the man-made disaster of austerity all the more tragic. Accordingly, the pain that Europe, especially its poor and young, is suffering as a result of its leaders’ willful ignorance of the lessons of the past is entirely unnecessary.
François Hollande’s victory in the French presidential election is a fresh chance for Europe. It should spell the end of a policy oriented exclusively towards austerity, which has paralyzed our economies and divided the EU, and should not scare anyone – certainly not the financial markets.
BRUSSELS – Rarely has an election resonated so widely across the European Union as the French presidential ballot has done. Rarely has a leadership change in one EU member state created expectations of a real policy shift.
The honeymoon for the ECB’s new president Mario Draghi has turned out to be brief. The trouble is that the eurozone has an austerity strategy, but no growth strategy – and, without that, all it really has is a recession strategy that makes austerity self-defeating, because, if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels.
