Shortly after the European bigwigs announced their plan to save the euro I made a wisecrack about their determination to believe that if they ignored the incentives they were creating long enough that they thought they would go away, implying that forgiving half of Greek debt would impel Ireland, Portugal, etc. to expect the same deal. It’s happening.
Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken.
Give ’em time.
Portugal asked Mexico on Saturday to tell fellow G20 members next week that the United States should offer “financial help” to resolve the euro zone sovereign debt crisis, describing it as a “systemic and global” problem, a Portuguese government source said.
Portuguese Prime Minister Pedro Passos Coelho asked Mexican President Felipe Calderon to convey the message during the G20 meeting in Cannes next week, the source told reporters after the two leaders met at the Ibero-American summit in Paraguay.
“The crisis isn’t in the euro zone. It is a systemic and global crisis and we hope that other big G20 countries intervene,” the source told reporters in the capital Asuncion, speaking on condition of anonymity.
The source added that Washington should help resolve the crisis “by boosting trade and also with financial help.”
This is more like a 12 step program than it is like a natural disaster. The first step on the road to recovery is genuinely wanting to change and that won’t happen until they’re hit rock bottom. They still don’t want to change—their attention is focused on saving French and German banks. I think we’d be better off reducing the extent to which that’s a “systemic and global problem” rather than ensuring that it is one. Also, I have complete confidence in the ability of the Europeans to deal with the problems in their financial system themselves.
Also, I have complete confidence in the ability of the Europeans to deal with the problems in their financial system themselves.
Dave, the problem when you’re snarky is that it is very hard for people to tell unless they’ve been reading your blog for years, and sometimes not even then. You need to add the CR comment section Snark image to such lines.
““The crisis isn’t in the euro zone. It is a systemic and global crisis and we hope that other big G20 countries intervene,†the source told reporters in the capital Asuncion, speaking on condition of anonymity.
The source added that Washington should help resolve the crisis “by boosting trade and also with financial help.—
This is most certainly a crisis of the EMU and NOT a global one. It fascinates and appalls that the Eurocrats can continue this charade without a hint of embarassment or shame at their naked hypocrisy, particularly Germany which is responsible for much of the debt crisis.
Boosting trade? So the U.S. is expected to once again become the buyer of last resort and allow its trade imbalance to deteriorate even further; perhaps this “source” has been in hibernation the last three years and hasn’t yet been informed the American consumer is dead broke. As bad as our leaders have been in the last three years, they don’t hold a candle to this.
As for financial help, we already made one massive round of bailouts for european banks (one the Fed decided we didn’t need to know about). The money itself isn’t of concern, but the “moral hazard” of it has reached new heights when whole continents now expect us to keep their banking systems afloat.
A good article on why Europe’s problems won’t be going away any time soon:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8858604/The-two-halves-of-the-eurozone-are-locked-in-a-broken-marriage.html
I read that article and I may post on it later today, Ben Wolf. One thing that probably should be taken into account: Mr. Evans-Pritchard has been well-known as a eurosceptic for a decade or more so that should be taken into account when reading his analysis. Also, the Telegraph is colloquially known as the “Torygraph”. Like most British papers it has a definite political slant.
“The Greeks will find out soon whether these officials answering to one Horst Reichenbach – unfortunately named for this delicate assignment . . .”
Reichenbach = Power-stream or Empire-stream?
Sooner or later the Eurozone is going to have to kick out the spendthrifts. or dissolve and go back to their own currencies. Yes, this is a Euro problem, an inevitable one exacerbated by the current global economic situation.
The source added that Washington should help resolve the crisis “by boosting trade and also with financial help.â€
Yo, crackman! Spot us some more crack until we can get past the shakes, OK? Whaddya mean, you’re low yourself? C’mon, man, do a bud a favor …
“Mr. Evans-Pritchard has been well-known as a eurosceptic for a decade or more so that should be taken into account when reading his analysis.”
There are aspects of his analysis I strongly disagree with such as what he thinks is the necessity of driving down wages to become more competitive, but I’d say that on most fundamentals he’s right about the difficulties. Still, your point is well taken.
Tully,
The problem is not one of spend-thrifts vs. responsible countries. Germany needs a collective slap in the back of the head whenever a technocrat steps forward and laments southern foolishness. Did they not realize that for Germany to be a net exporter someone else must be a net importer? The only reason the German economy has performed as strongly as it has over the past decade is because countries like Greece were buying lots of German products, even when they couldn’t afford them.
In both trade and sectoral balances it takes two to tango.
Ben, which would not have been a problem without the united Euro. As I said, inevitable.
Tully,
True. Greece wouldn’t be in this mess if it hadn’t surrendered its sovereignty.