Eurocrash: a fog of incomprehension
Wednesday 29 August 2012
  Handelsblatt, as so often, leads the way with a long report (headlined above). It tells us that the ECB is probably the only EU institution that can prevent the worst - a breakup of the eurozone. But any thought of intervention is not only attracting the opprobrium of the Bundesbank and all the usual suspects. Added to the list of naysayers is the doyen of the CSU, Max Strauss who grandly declares: "The ECB's crisis policy is attack on democracy". Then there is Jürgen Stark, ex-ECB chief economist. His former employer, he says, is treading a "very dangerous path" in "allowing its independence to be eroded by politicians". He adds that bond purchases are effectively monetary financing - where the central banks print money to pay off a sovereign debt - something expressly forbidden in the ECB mandate. What has got the commentators all a twitter, though, is the news that ECB president Mario Draghi was due speak at Friday's annual Jackson Hole symposium in Kansas City, but has cancelled his appearance because of a "heavy workload". Since Bundesbank chief Jens Weidmann still plans to go, this has raised all sorts of wild rumours, to the effect that Draghi is planning something major, and something soon.
Predictably, though, no details have emerged, leaving the whole situation up in the air. If he has a plan, it doesn't even have a name as yet.
That situation has not been particularly helped by first Hollande and then van Rompuy telling us that the euro is "irreversible". Alongside the euro, such assurances are a seriously debased currency. Back to Handelsblatt and we get Jörg Krämer of Commerzbank expecting the eurozone to mutate over the next twelve months, becoming a "liability union". Kramer thinks there are similarities with Italy of the 70s and 80s, and he thus dubs this version of a future construct an "Italian Monetary Union". It is believed that this option could prevent the insolvency of the peripheral countries, but the finance ministers and central bankers of the core countries would be liable for their debts. "This liability union through the back door will push the cost of financing the peripheral countries and stem the sovereign debt crisis," says Kramer. Like as not, in this scenario, we see a cut in interest rates and a weaker euro, followed by galloping inflation in the medium to long-term. Commerzbank does not see this as a sustainable option, and offers alternatives, as in the "phoenix-from-the-ashes-Union" and a "salami-Union", the latter resulting in countries like Greece gradually abandoning the euro. Greece would be the first of these countries, whence a "frustrated international community" would then probably turn off the money tap. Another scenario is the "injured Union". Here, governments agree too late to help the peripheral countries, and monetary union collapses. There was a risk that this could happen by accident, but it probably would not happen because the political élites in their own interest would do everything they could to prevent it. That, though, is all we have – speculation and theorising but no hard detail. The more we learn, the less we know, and the frustration mounts. But that leaves Hans-Olaf Henkel in Handelsblatt who is reminded of TV wrestling, where the fighting is just for show. It is shadow boxing and not at all real. Add yet another piece which has the Bundesbank shooting blanks, and the consensus becomes that no one can predict what is going to happen. That really is the best we can do, even if Merkel isnow saying that that the hardships experience by the Greeks make her "gentle heart bleed".
Bless!
COMMENT THREAD Richard North 29/08/2012 |
Climate change: one of the best
Tuesday 28 August 2012
 For those of us who know better, this is an absurd proposition but it makes no difference to argue it either way. We have ourselves here a dialogue of the deaf. Those who believe current ice levels arise from man-made climate change will continue to believe that. Those of us who disagree will continue to disagree. As always, you pays your money (or not) and pick the headlines that suit you, as with the rainy summer. According to the Failygraph, we are heading for the wettest on record, while the Gruaniadtells you (under the headline "weatherwatch") it cannot beat the record set in 1912. When it comes to headlines, though, you would have a job beating Süddeutsche Zeitung, which has us believe that the levels of Arctic ice amount to a problem more serious than the euro crisis. This is a timely reminder, if nothing else, of how much trust we can place in newspaper headlines. COMMENT THREAD Richard North 28/08/2012 |
Wednesday, 29 August 2012
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