Tag Archives: ECB

Spain Continues to Disappoint

Reports this morning suggest that Spain is in the throes of an ever-deepening financial crisis. The country’s industrial production took another dive, falling by 6.5 per cent in February compared to the corresponding month in 2012. Earlier this morning, during a speech to the country’s parliament, Spain’s Prime Minister, Mariano Rajoy appealed the eurozone for solidarity. He asked that all countries take part in attempts to bring the region back from the verge of an economic abyss. Meanwhile, data from Italy and Spain also looked weak, while France’s industrial production only dropped by 2.8 per cent year-on-year in February.

Germans Committed to the Euro

A poll released on Tuesday found that an overwhelming majority of Germans oppose a return to the Deutschmark. A whopping 69 per cent of the respondents answered in the affirmative when asked if they would like to stay in the euro, while only 27 per cent favoured exiting the euro and returning to the old Deutschemark. The results indicate that Germany’s euroskeptics have, led by Bernd Shucke, have very little support. Apparently the country’s robust and consistently well-performing economy swayed the Germans that the single currency is a worthy experiment. Most analysts concede that the on-going fiscal crisis shaking the Eurozone caused great worry among Germans, but the common perception in the country confirms the results of the survey: for Germany, the euro’s benefits outweigh its costs.

Maggie Called It

The former British Prime Minister Margaret Thatcher, who passed away yesterday, was a ferocious critic of the single currency. Her prophetic words ring true today as we are witnessing an unprecedented wave of failing economies across the eurozone.

“Every single fixed exchange rate has cracked in the end. We’re all at different levels of development of our economies. Some countries simply couldn’t live up to a single currency… We should each of us be proud to be separate countries cooperating together,” Thatcher acknowledged already in 1992.

Indeed, the eurozone’s main hindrance today is the development gap between its member state. Even if the euro is still staying afloat, Mrs. Thatcher’s words should resonate with Europe’s policy makers.

Portugal Woes Weigh Heavy on the Euro

The euro was trading around $1.30 against the dollar during Monday afternoon trade, anticipating bleak news from any one of the zone’s troubled economies. Following Cyprus and recently Slovenia – Portugal has now appeared as the latest patient in need of potentially instant care. On Friday Portugal’s high court ruled that the country’s plans to introduce pension cuts to its public sector was unlawful thus forcing the country to cough up another 900 million euros – precondition for the bailout – to fund its pending rescue package. Unlike other sick men in Europe such as Cyprus and Spain, Portugal is a student of austerity, an economic philosophy championed and cultivated by northern European countries. However, it seems that spending cuts are not enough to keep the Western European nation afloat.

Et tu, Slovenia?

The markets had just gotten comfortable with the botched Cyprus bailout and the turmoil that followed, when Slovenia emerged as yet another country to potentially require a bailout. If the eurozone’s history is any indication, rumors tend to come true. Now, Slovenia, with successive governments rejecting attempts to privatise the country’s banks, is facing a banking crisis. The small Balkan state needs to recapitalise its banks, but does not have the means to do so. The eurozone leaders are once again faced with a new challenge likely to spur resentment across Europe. Citizens all over the eurozone are growing tired of seeing a constant flow of tax money to countries that have – for a variety of reasons – mismanaged their economies.

Euro Skepticism

Two prominent, high-profile individuals, both ardent observers of the eurozone, told reporters on Sunday that the single currency will soon be a thing of the past. Paul de Grauwe, a Belgian economist lecturing at the London School of Economics told a Finnish daily that the euro’s woes will eventually bring it down. He added that the blame rest solely on the austerity minded Northern bloc, comprising Germany, Holland and Finland. De Grauwe blamed the tough trio for its save and cut policies and argued that these policies do not correspond with the high expectations the trio’s has for the ailing southern European nations. Bernd Lucke, another skeptic and the founder of Germany’s first eurosceptic party, told The Telegraph on Sunday that Germany has had enough of the single currency. Lucke argues that the euro divides Europeans and will do more harm than good. Unlike de Grauwe, Lucke is a politician whose niche in the debate is quite clear, but de Grauwe wants to see the euro succeed. Motivations aside, both agree that the euro is doomed.

Economist Predicts the end of Euro

A world-renowned Belgian economist, Paul de Grauwe told Finnish daily Helsingin Sanomat on Sunday that the eurozone will self-implode within 10 years. De Grauwe said that eurozone decision makers, led by Finland, Germany and Holland, have made a number of serious mistakes in managing the current crisis. These countries have demanded steadfast economic growth from ailing economies while swearing in the name of austerity. De Grauwe said that such demands have been unreasonable because Northern Europeans have applied strict economic policies on their own economies thus preventing southern eurozone members from flourishing. According to De Grauwe, Germany and Finland should not be proud of their budgetary discipline, but instead, should spend and stimulate.

Super Mario to the Rescue?

The euro fell earlier on Thursday as investors were anticipating ECB chairman Mario Draghi’s policy suggestions to revive the ailing single currency following substandard attempts to save Cyprus. Draghi said in a recent press conference that ECB’s monetary policy will remain accommodative.

“In the coming weeks, we will monitor very closely all the incoming information on economic and monetary developments, and assess the impact on the outlook for price stability,” Draghi said to reports on Thursday.

Most investors did not expect Draghi to make significant changes which could have either potentially boost the euro or create a backlash and thus possibly deepen the recession.

IMF to Give Cyprus €1bn

As part of the €10bn troika rescue package, International Monetary Fund contributes 1 billion euros. IMF president Christine Lagarde told the press that the monetary fund will give Cyprus a three-year loan to assist the country with efforts to restructure the ailing island nation’s sickly banking sector. Lagarde said that “the IMF has reached staff level agreement with the Cypriot authorities on an economic programme that will be supported by the IMF jointly with the European Union and the European Central Bank”. As part of the bailout, Cyprus’s second largest banks, Laiki Bank will be shut while Bank of Cyprus will have to go through serious restructuring.

In Austerity We Trust

Reuters reported on Tuesday that a German parliamentarian - closely associated with Chancellor Angela Merkel – wants to see more cooperation between triple-A countries Netherlands, Finland and Germany. The parliamentarian in question, Hans Michelbach from the Christian Social Union (CSU) said that the three countries should stand together to strengthen the ailing currency union. Micelbach’s comments came during fierce speculation over the euro’s future.

The highly controversial Cyprus bailout, which Micelbach seemed to praise, raised questions about the tangibility of the currency union, especially in the face of growing discrepancies between the zone’s northern and southern members.

The parliamentarian used some tough language to describe France and Italy by referring to the European giants as “problem children”, reports say. He affirmed Germany’s commitment to its two natural partners, but lamented France’s president Francois Hollande for his socialist experiments and argued that such policies could lead to serious problems.

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