Category: Europe/Middle East

Breaking the EU’s Crisis to Crisis Cycle


Just months since taking power in January, Greek’s Syriza coalition faces obstacles at every turn, from an intransigent European Central Bank to an unyielding European Council.  The ECB in particular has rejected Greek proposals for short-term bridge financing to allow more time to negotiate medium- to longer-term structural reforms.  So once again, we are on the cusp of crisis as Greece and its creditors struggle to find a deal before an upcoming June deadline, with the country’s exit from the Eurozone a genuine possibility.

An EU without a UK?


“We would be substantially better off not being in the EU because the opportunity cost of us not being able to make our own trade deals with the emerging economies of the world is holding back British business. In terms of trade, the EU is now a millstone around our neck.” – Nigel Farage, UKIP leader, on the BBC Radio 4’s World at One on May 4.

A Weak Euro Begins the Week as European Manufacturing Data Disappoints


The week begins with a narrowly mixed US dollar.  Both Tokyo and London markets are closed today making for somewhat lighter turnover.  The dollar has been trading a quarter of a yen above JPY120.00. 

The euro stands out.  It has lost almost 0.5%, has dragged the Swiss franc with it.  Recall at the end of last week, the euro was fairly resilient to the US dollar’s recovery.  There is a bit of catch-up going on as European dealers returned from their May Day holiday. 

The Euro Reaches a Buying Opportunity, European Bonds Continue to Sell Off on Mixed Data


The euro pullback spurred by the Federal Reserve statement that continued to regard the slowdown as having to been partly caused by transitory factors, was seized upon in Europe as a new buying opportunity.  Support is seen near previous resistance in the $1.1050 area.  The euro extended its recovery, rising to almost $1.1250.  The retracement objective of the slide since mid-December comes in near $1.1265, which is also the boom of the shelf created in February.  Above there, the $1.1515 area is the 50% retracement, while the double bottom projects toward $1.1600-50.

‘Economic-Only’ vs. ‘Economic-Plus-Political’ EU Membership


Norway is often held aloft as an example that the UK could follow in discussions about a potential British exit from the EU (the so-called Brexit). The Norwegian experience with the EU is unique. It shows it is possible for a country to be economically associated to and, at the same time, politically separate from the EU.

Economists Forecast Eurozone Growth


Analysts predict that the Eurozone economy will gain traction as consumers have more money to spend from low oil prices, among other factors like the funds flooding the market from the ECB’s asset-purchase program. Economists expect per-quarter growth of 0.4 percent until 2016, including an annual growth rate of 1.4 percent for 2015 and 1.6 percent for 2016.

Where is Greece on Germany’s Priority List?


After several months of tense and often antagonistic negotiations, Greece and its creditors appear to be at a stalemate. In order to receive a further bail-out funds, the Syriza government has proposed a set of reforms that in the view of Germany, the ECB and the IMF “don’t make the grade”.

To many, any compromise by Syriza represents a tragic surrender of its principles and a blow to the emerging anti-austerity sentiment rising across Europe. As one Athenian commentator observed:

Understanding the Divide Between the German Workers and Elite


The differences between Eurozone members tend to be a key focus for investors and policy makers.  There is another fissure which is typically is under-appreciated.  It is within Germany itself and not discussed in polite company.  It is the divide between German workers and the economic elite.

The German economic model, under which it exports 40% of everything it produces, presupposes a highly disciplined work force, where employers keep the lion’s share of productivity gains, fiercely resisting increases in unit labor costs.  

Preserving the EU through Compromise with Greece


As the hard talks on Greece’s bailout start again, there is no time to lose. A compromise is possible. 

Before the weekend, Euro group president Jeroen Djisselbloem said that “Greece wants a lot but has very little money to do that. That’s really a problem.” 

Unfortunately, Brussels is not exactly in a winning position either. 

Will the OMT Program Turn the Eurozone into a ‘Transfer Union’?


The European Central Bank (ECB) symbolises the strange mix of politics and technocracy that marks EU governance. The bank was pushed to centre stage by the Eurozone debt crisis and the unwillingness or inability of Europe’s national governments to come up with timely solutions. Its rise as a political actor started while it was led by Jean-Claude Trichet, but it has become much clearer under his successor, Mario Draghi.