Category Archives: Currencies

Europe’s Depression Worsens

Yves here. Take note in particular the discussion of the state of play in Italy. Even though other countries under the German yoke are complaining, Italy is the one that can credibly defy Germany, and the Germans know it.

I welcome comments from people who are following European media. I’m not sure that Latta’s failure to round up supporters matters much. I’d imagine he wants to position himself as Berlusconi’s messenger rather than a staunch ally.

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

As I mentioned earlier in the week Italy may have a new parliament but there is very familiar person who appears to be pulling the strings, and how long such an arrangement can last is questionable.

Did the Euro Kill Governance in the Periphery?

Yves here. We’re a little EU-centric tonight as a result of a wealth of particularly good material, which is often a sign that stresses are rising (there was tons of good material in the runup to the crisis as well).

By Jesús Fernández-Villaverde, Professor of Economics, University of Pennsylvania and Luis Garicano, Research Fellow with the Productivity and Innovation Programme, Centre for Economic Performance; Professor of Economics and Strategy, Departments of Management and of Economics. Cross posted from VoxEU

By the end of the 1990s, under the incentive of Eurozone entry, most peripheral European countries were busy undertaking structural reforms and putting their fiscal houses in order. This column argues that the arrival of the euro, and the subsequent interest-rate convergence, loosened a tide of cheap money that reversed the incentives for further reforms. As a result, by the end of the euro’s first decade, the institutions and governance in the Eurozone periphery were in worse shape than they were at the start of the decade.

France Versus Reality

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Yesterday I noticed an interesting paragraph over at efxnews about France and its parallels with what many see in the market today:

It’s a big surprise for some that France is high on the crisis susceptibility index…

Bundesbank Looks to Undermine Italy

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2013/02/europe-waits-for-italy/“>MacroBusiness.

Another chapter in the Italy political story comes to a close as a government is formed, for how long who knows, but a familiar figure appears to be playing puppet master…

Yanis Varoufakis: Intransigent Bundesbank – Mr. Jens Weidmann’s Surreptitious Campaign to Bring Back the (Greater) Deutsch Mark

By Yanis Varoufakis, Professor of Economics at the University of Athens. Cross posted from his blog

Any fair minded reading of the Bundesbank’s latest Constitutional Court deposition must lead to one of two conclusions: Either the Bundesbank has failed to recognise the existentialist threat to the Eurozone (that was placed in suspended animation during the past eight months or so), or the Bundesbank has intentionally opted for a strategy that will, sooner or later, see the disbanding of the current Eurozone. Loath to assume naiveté on the Bundesbank’s part, I opt for the latter. Here is why:

If Only Europe Could Sell Unemployment

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2013/01/imf-admits-more-mistakes/“>MacroBusiness.

Another day, another round of atrocious data out of the Eurozone:

Why Germany (Mistakenly) Thinks it Can Kill Its Export Markets Through Austerity and Still Prosper

I’ve mentioned repeatedly that Germany wants contradictory things: it wants to stop financing its trade partners (the periphery countries in Europe) and yet wants to continue to run large trade surpluses. I took this to be a sign of German wishful thinking, or just politicians figuring the incoherent strategy can still be maintained for the duration of their time in office.

A post by Yanis Varoufakis show that the Germans at least have better delusions that I realized.

Troika Demands Another €6 Billion from Cyprus, Making “Rescue” Bigger Than GDP

Nothing like dramatic proof that austerity is a failure

Destruction of Cyprus Economy Proceeding Ahead of Schedule

When I first heard about the Cyprus ~~ritual execution~~ bailout, I had thought that the widespread predictions that the island nation’s economy would contract by 20% to 30% over the next two years were off base.

Yanis Varoufakis: The Good, the Bad and the Extremely Ugly (Aspects of the Cyprus Deal)

Yves here. The longer you look at the Cyprus “rescue,” the worse it looks. As you can learn from our compendium in today’s Links, the Cypriot economy is already reeling. It’s straining under the extended bank holiday, which is scheduled to end Thursday. Moreover, the impact of losses radiating from number two bank Laiki are already propagating through the island.

And that’s before we get to the wider ramifications. Whether Germany understands it or not, it has delivered a fatal blow to the Euro project. How long it continues is anyone’s guess, but the Balkanization of the financial system that the Eurocrats have set in motion means they won’t be able to go the US/Japan zombification route.

ECB to Push Cyprus Over the Brink

Mr. Market decided yesterday that the fact that the Cypriot finance minister, Michalis Sarris, was meeting as previously scheduled with Russian officials meant all would be well. And even better…Bernanke said the Cyprus banking mess would be contained. So why worry?

The ECB just announced that it will extend the ELA to Cyprus only through Monday. After that, it will cut off Cyprus if it has not knuckled under to an EU/IMF deal.

Cyprus Bailout: What to do Now?

Yves here. You will notice that this list of options for Cyprus is very depressing and does not envision Russia riding in to the rescue in a big way. It also treats a 20% fall in GDP as a possibly optimistic base case.

Cyprus: Will the Mouse That Roared be Gored? (Updated)

Cyprus, as its President Nicos Anastasiades predicted but no one outside Cyprus quite believed would happen, has resoundingly defied the will of the Eurozone in failing to surrender a single Parliamentary vote to a diktat to haircut depositors to save its number two bank, whose failure would in all likelihood bring down Cyprus’s entire banking system. The members of the President’s own party abstained despite his resigned support for the deal. And mind you, this was after the terms revised to allow for deposits under €20,000 to be spared.

The EU was utterly unprepared for this rebellion.

Cyprus Bailout: Stupidity, Short-Sightedness, Something Else?

A quick run-down on the impressively stupid handling of the “Cyprus bailout” by the EU.