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Open Think Tank Articles
Andreas Kern: The initial steps taken to deal with the debt crises have created a new kind of toxic asset: government bonds. If the Eurozone and G-20 members do not take adequate action to coordinate their financial regulation, a government bond credit crunch will be the next shock to strike the faltering global financial system.
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Editorial Team: “Armadebton” and “Debtocalypse” are terms Jon Stewart has used to describe the US debt crisis. European commentators have not yet coined a name for their continent’s debt troubles as eurozone pessimism reaches new depths. Share your thoughts on the on-going sovereign debt crisis.
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Hans F. Bellstedt: Joschka Fischer’s call for “greater European political unification” will not help solve the EU’s ongoing debt crisis. The only way to regain the public’s trust and restore financial markets is strict fiscal austerity as a prerequisite for future sustainable growth.
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Joschka Fischer: Europeans must forge ahead with the political union now; otherwise the euro and EU integration will be undone. Europe would then lose nearly everything it has gained over a half-century from transcending nationalism. In the light of the emerging new world order, this would be a tragedy.
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Guy Sorman: Governments throughout Western Europe are suffering from a dearth of popular support. Leaders from the left, right and center of the political spectrum have all seen drops in approval ratings. They have proven themselves incapable of explaining the economic crisis to their citizens and lack vision.
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Joerg Wolf: How should the euro zone members deal with the PIIGS? Portugal, Ireland, Italy, Greece and Spain have big budget deficits and other economic problems that lead to speculation against the euro. How serious is it? What should be done?
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Global Must Read Articles
The collapse of Greece’s financial system would be as detrimental as that of a major bank. ++ Germany ultimately benefits from a stable euro-zone. ++ Germany has said that it supports assistance to Greece as a last resort. ++ The German government is now prepared to join the bailout effort as Greece has now made necessary concessions. ++ “Having an effective Europe, both
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The Greek deficit revealed two major flaws in the European integration machine: firstly the sheer absence of a budget deficit watchdog and secondly the lack of either support or sanction if one member state eventually goes bankrupt. ++ Germany, having sacrificed much to the Euro’s implementation, is right to be angry. ++ But rationality should overcome wrath, for the cost of inaction might be
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The global financial crisis has had severe repercussions in the new Eastern European EU-member states, as well as in the three former Soviet Republics of Belorussia, Ukraine, and Moldavia. The following lessons can be drawn from the manner in which the crisis impacted these Eastern European countries:
If a currency peg is to be used in this region, then it should be in the dominant currency in
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The economic and political divisions between a “hard core” Northern Europe and a crumbling South are re-emerging in the midst of the economic crisis. ++ Euroskeptics argue that this will eventually lead to a departure of the “South” from the Eurozone, whilst europhiles predict that it will produce an even “wider euro area assuming the debts of the weaker nations.” ++ The
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Though the UK economy has become more “European,” one area of contrast endures: the euro. ++ UK capitalism has been discredited and the credit crunch will be a test that may prove independent currency is bad for financial stability, reviving the case for joining the euro. ++ However, disparities in production, investment, wages and yields between EU countries could unravel the entire currency. ++
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Despite the success of some initial bank bailouts granted by the EU, such as Fortis, Europe is still short of an overall financial strategy. ++ Three things are needed: first, money to recapitalize the banking sector; second, a semi-permanent EU crisis committee to make financial decisions; and third, clear rules indicating when to recapitalize. ++ Sarkozy was right to support a EUR 300 billion
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The Euro is not yet ten years old, but its success to date has been unquestionable. ++ Despite numerous exogenous shocks - ranging from the specter of terrorism to the subprime mortgage meltdown in the US - the Euro is still going strong. ++ Without a single currency, member states of the European Monetary Union would likely be experiencing the capital exploitation and speculation seen in the
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The downturn of economic activity in the Eurozone has come as a surprise. ++ The twin shock of the exchange rate of the euro and oil prices squeezed profits from exporting firms. ++ The opposite has happened in the US, where the export sector is booming. ++ The European Central Bank allowed this to happen by only caring about price stability and allowing massive euro appreciation. ++ The ECB
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Even though the European Central Bank reassures the investors that the euro has great prospects, business activity on the Old Continent is falling and consumer confidence is plummeting. ++ On Friday, the euro had its worst day against the dollar in 4 years and there are reasons to believe this was not a temporary blip, but the beginning of a trend. ++ Analysts were so focused on American
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Outperforming the dollar and the yen, the euro is a resounding success. ++ Still, Eurozone policymakers should allow for more economic freedom and encourage competition. ++ Europe should stop supporting national enterprises and give the ECB more support. ++ In terms of external economic policy, Europe should offer the world its experience and help reform the G8 and IMF as well as deal with
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The US dollar was for a long time the leading global currency against which all other foreign currencies were measured. The downside of this is that as a result, the USA has accumulated a huge trade deficit. In 2006, foreign goods and services purchased by Americans were worth 600 billion USD more than the goods and services they sold abroad. Every day, the US needs to draw on seven billion
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The Fed is undermining global confidence by flooding the economy with new dollars while it should in fact be pursuing direct and targeted intervention. ++ Since US global purchasing power is used for humanitarian, economic or military purposes, a further fall of the dollar will damage US political influence. ++ The rise of transactions in Euros neuters US ability to control financial flows to
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The IMF’s need for governance reform points to the EU’s lack of management of its external monetary policy. ++ Consolidating the representation of Eurozone members on the board - currently 15 members are awkwardly split among 8 chairs - would increase effectiveness, give the EU a voting power that truly reflects the euro’s strength on bond and currency markets, and strengthen the voice of
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The March 2007 Bruegel Policy Brief reveals that imbalances in global current account positions are not sustainable and need adjustment. A 15% depreciation of the dollar and an appreciation of Asian currencies is needed in order to:
- reduce the US current account deficit,
- faciliate China’s focus on domestic demand and reduce its accumulation of foreign exchange reserves, and
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