Tag Archives: Eurozone

ECB: Stark Warning of Eurozone Debt Crisis

17 Mar

From BusinessWeek:

European Central Bank Executive Board member Juergen Stark said the euro region may face a sovereign debt crisis unless governments reduce budget deficits.

There is “a clear risk that we will enter a third wave,” which is “a sovereign debt crisis in most advanced economies,” Stark told lawmakers in the European Parliament in Brussels today.

In Australia, our government is continuing to increase our budget deficit, by refusing to withdraw its woefully incompetent and wasteful “stimulus” spending.

Even though we had no recession, and RBA Governor Glenn Stevens recently referred to 2008-09 as “the mildest downturn” we have had since WW2.

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Soros: Euro ‘May Not Survive’

8 Mar

From Bloomberg:

The euro is being “severely tested” and “may not survive” the Greek deficit crisis, billionaire investor George Soros said.

The European currency’s construction is “flawed” because there is “a common central bank, but you don’t have a common treasury,” Soros said on CNN’s “Fareed Zacharia GPS” program.

“The exchange rate is fixed. If a country gets into difficulty, it can’t depreciate its currency, which would be the normal way,” Soros said.

The sovereign debt crisis in the Eurozone is far more serious than Australia’s economic authorities at Treasury and the Reserve Bank are admitting. A collapse of the Euro – and the European Monetary Union – would clearly have huge impacts for the global economy, including Australia.

Barnaby is right.

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Stevens’ Nonchalance ‘Stunning’

2 Mar

This excellent article by David Uren at The Australian suggests that he may be the only mainstream journalist in Australia who is awake to international developments, and not in awe of every utterance from RBA Governor Glenn Stevens:

If the Reserve Bank raises rates again tomorrow, it will risk repeating the mistake it made in early 2008, when it failed to see the global financial crisis coming.

Now, as then, it is beguiled by soaring commodity prices and believes Australia can shrug off what it sees as essentially local woes in the industrialised world.

In 2008, it was the subprime crisis, and today it is the sovereign debt crisis, focused for the moment in Europe.

Glenn Stevens’s nonchalance about the Greek debt crisis at the recent parliamentary hearings was stunning.

It had been no more than a marginal influence on the RBA’s decision to hold rates steady in February, he said.

“There is a bit of uncertainty about how all of that is going to be resolved. I do not think, myself, at this point, that those issues will directly present a serious problem for Australia. After all, it is a sovereign debt issue for Europe.”

Europe still represents about a quarter of world GDP and its unity and sound finances matter a lot for global financial stability.

US academics Kenneth Rogoff (a former IMF chief economist) and Carmen Reinhart have been among the most influential analysts of the developments of the past two years because of their analysis of crashes in 66 countries stretching back two centuries. “Serial default remains the norm,” they say.

There is often a lag of some years, leading policymakers to believe “this time it is different”.

Rogoff, who did predict the GFC, is currently warning that China is in a bubble, one that he believes will burst within ten years. If so, then so much for the belief that Australia is on the verge of a new China-fuelled mining boom.

Glenn Stevens appears to be in a bubble of his own, oblivious to the ever-growing warnings from leading international economists about the Eurozone crisis, and/or a new Asia Crisis triggered by the inevitable bust of China’s real estate bubble.

A man who apparently does not learn from his epic failures of the past, should no longer be permitted to retain such enormous power over the economy, and the lives of 22 million Australian citizens.

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Greek Debt Crisis Reflects Global Problem

1 Mar

The Greek debt crisis represents a threat to the entire Eurozone, and ultimately, the global economy:

Simon Tilford, chief economist at the Center for European Reform in London, says the Greek crisis reflects a larger economic problem in Europe. EU members like the Netherlands and Germany have spent too little and their economies are driven by exports. Meanwhile, southern economies like Greece and Portugal have spent too much and amassed debts as a result.

Now that sounds familiar – “…economies are driven by exports… spent too much and amassed debts as a result”. One could be forgiven for drawing a logical conclusion – that the Australian economy, far from being a shining beacon of fiscal prudence, actually encapsulates the worst of the Eurozone’s economic dilemma.

Greece’s problems are also spilling beyond Europe’s borders. The value of the euro currency has plunged for example, which makes American exports – key to the U.S. economic recovery – less competitive.

Ultimately, Tilford says, the Greek problem reflects a world economic problem.

“The eurozone s really just a microcosm of the global problems we see. So unless we see the big countries in East Asia rebalancing away from exports and toward domestic demand, we are not going to generate a self-sustaining global economic recovery,” he said.

But Tilford does not believe Europe is ready, or willing, yet to undertake fundamental economic reforms he thinks are needed to right these imbalances. The region may rescue Greece, he says, but it will only be putting a bandage on a far bigger problem.

Could it be that, as with every other global trend, Down Under Australia has not “escaped” the GFC at all, but is simply running a few years behind everyone else?

Barnaby is right.

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