Eurozone crisis may make a move toward a political federation necessary
Date: Tue, 5 Apr 2011
Portugal downgraded again as markets accept that a bailout is inevitable;
Trichet: Eurozone crisis may make a move toward a political federation necessary (!!!)
Moody's cut Portugal's credit rating today in the latest of a series of downgrades which have hit the country over the past month. The agency stated that it expected the new Portuguese government to seek external aid 'as a matter of urgency'. The Portuguese cost of borrowing hit 9.91% yesterday, meaning that it is now higher than Ireland when it requested a bailout. The FT reports that nearly all investors and Portuguese commentators see a bailout as inevitable, except former Prime Minister Jose Socrates who maintains his opposition to a bailout.
Speaking in Brussels last night, ECB President Jean-Claude Trichet warned eurozone leaders that current plans for economic governance do not go far enough, saying that, “Either we prove that we are able to find the new strong reinforced governance concept, which will fit with a constellation of sovereign states and permit the European Union to face up with the new globalised world. Or, we do not convincingly succeed into this direction, and then a new jump in the institutional framework of Europe toward a political federation will appear necessary
EUobserver notes that the Greek government next proposed round of austerity,
aimed at raising €25bn, will focus on tax increases rather than spending cuts.
A report by the Economist Intelligence Unit has concluded that while the eurozone will most likely muddle through the current crisis, there is a 15% probability that political pressure from disgruntled voters in struggling member states will force them to abandon the shared currency, which would result in the "effective end of the euro areaâ€.
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