In this piece, Zsolt Darvas talks about how the markets are charging high interest rates for sovereign bonds of peripheral eurozone countries, while keeping the euro exchange rate strong, at the same time. The euro-dollar exchange rate continues to stay well above its equilibrium value and its depreciation earlier this year meant just a correction toward equilibrium. Is there not an anomaly? And do recent eurozone governance proposals play a role? What is the path forward? Írország az elmúlt hétvégén uniós mentőcsomaghoz folyamodott, így Görögország után egy újabb euróövezeti ország szorult pénzügyi segítségre. Az ír kormánykoalíció felbomlott a mentőcsomag miatt. Portugáliára is nyomás nehezedik, és számos borúlátó nyilatkozat jelenik meg az euróövezet végét jósolva. Mindeközben azonban az euró árfolyama a dollárhoz képest erős,… Read more
Bruegel blog
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Szétzilálja-e az eurózónát az adósságválság?
25th November 2010
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Wie die Euro-Zone ihre Schulden bewältigen kann
16th November 2010
In this piece, Jean Pisani-Ferry and André Sapir talk about a recently proposed initiative - the European Crisis Resolution Mechanism (ECRM). They argue that the ECRM would ensure that the transformation of the European Financial Stability Facility (EFSF) into a permanent European instrument respects the two requirements agreed at the recent Franco-German and European summits: very strong conditionality for loans to solvent countries and private sector involvement for countries with unsustainable debts. Last May, at the height of the sovereign debt crisis, euro area leaders set up a temporary rescue fund for countries in difficulty, the European Financial Stability Facility (EFSF). No country has yet requested help from the EFSF, but there is persistent rumour that Ireland is about to… Read more
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After Seoul: the challenges of international monetary reform
16th November 2010
In this piece, Jean Pisani-Ferry talks about the idea of International Monetary System (IMS) reform. The US, for whom IMS reform is synonymous with the decline of the dollar, are not keen and the Chinese, who launched the idea, lack precise ideas. As for Europe, it is distracted with its internal problems. Reform of the IMS is a legitimate aspiration, but reforming the international monetary order is likely to be a tough job. If Nicolas Sarkozy himself had written the prologue to his G20 presidency, he could not have done better. The run-up to the Seoul summit was marred with global monetary chaos and ensuing controversies. Whereas French intentions had initially been received sceptically, events have borne out the priority… Read more
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Unbalanced Europe
15th November 2010
In this piece, Benedicta Marzinotto talks about currency wars and Europe's imbalances. The G-20 governments have declared that competitive devaluations (or currency wars) must be avoided and that excessive external imbalances should be monitored and handled in a coordinated way. The EU's internal imbalances, however, are being treated as a single region. The immediate problem is to correct todays imbalances, but given the political considerations driving the EUs approach to the issue, the adjustment process could be long and challenging. The G-20 governments have declared that competitive devaluations (or currency wars) must be avoided. Excessive external imbalances, they also argue, should be monitored and perhaps fought in a coordinated way.Those resolutions sound mild. But there is no good reason to tackle… Read more
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The euro conundrum
10th November 2010
In this piece, Zsolt Darvas talks about how the markets are charging high interest rates for sovereign bonds of peripheral eurozone countries, while keeping the euro exchange rate strong, at the same time. The euro-dollar exchange rate continues to stay well above its equilibrium value and its depreciation earlier this year meant just a correction toward equilibrium. Is there not an anomaly? And do recent eurozone governance proposals play a role? What is the path forward? Markets are charging high interest rates for sovereign bonds of peripheral eurozone countries, but are at the same time keeping the euro exchange rate strong. Indeed, the euro-dollar exchange rate continues to stay well above its equilibrium value as defined by purchasing power parity since mid-2003, and… Read more
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After the G20: time for realism in global financial regulation
10th November 2010
While the noisy arguments about macroeconomic imbalances and exchange rates dominated the publicity at the recent G20 summit, the participants in Seoul also marked an important milestone for financial regulation. They symbolically closed a cycle of intense global discussions that started two years earlier with the first G20 summit in Washington. The most prominent item was the endorsement of the Basel 3 accord on bank capital and liquidity, which was completed in September. That agreement significantly tightens earlier requirements and provides a convenient opportunity for world leaders to declare “mission accomplished” and move on to other topics. In many respects, the scope for global financial reform is becoming narrower. In the US, the adoption of the Dodd-Frank Act in July… Read more
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Prospects for the Seoul Summit
8th November 2010
The fifth G20 summit, taking place in Seoul, Korea, on November 11-12, 2010, stands out as a significant event in several ways. It is the first time a G20 summit has been held in Asia, after the first four in the largely Anglo-American, Atlantic world. It is the first time the summit has been hosted by a new rapidly emerging country, rather than by an established G8 power of the past. It is the first time the summit will be delivered in tandem with the Asia Pacific Economic Cooperation (APEC) leaders’ meeting, taking place immediately after on November 13-14 in neighbouring Yokohama, Japan. It is also the first time the summit will be held in a region where the Cold… Read more
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Il nuovo fronte, gli squilibri dell' euro
8th November 2010
Una moneta europea forte rafforza i rischi deflazionistici in una regione che al massimo quest' anno crescerà del 2% contro il 3% degli Usa Il 10 novembre si apre il G20 a Seoul in Corea. L' agenda è fittissima ma si tornerà a parlare di squilibri mondiali e della «guerra delle monete». Se n' era discusso già a fine ottobre quando i governi del G20 avevano scartato l' ipotesi di imporre un limite quantitativo al saldo della bilancia commerciale di ogni singolo Paese e concordato un programma quadro di mera vigilanza. Si presume che ora venga confermato lo stesso orientamento. D' altra parte le recenti turbolenze sui mercati dei cambi giocano a favore della correzione di almeno alcuni degli squilibri… Read more
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The current accounts quandary
5th November 2010
In this piece, Jean Pisani-Ferry talks about the latest economic policy proposal by the US and EU and the differing motivations behind these moves. While the US administration is concerned about the exchange rate gridlock with China and the rebalancing of demand between deficit and surplus countries, the EU is interested in reforming the rules of the game, rather than monitoring adjustments between surplus countries and deficit countries. The G20 should now take action on current accounts. US Treasury Secretary Tim Geithner has recently proposed that the G20 countries “undertake policies consistent with reducing external imbalances below a specified share of GDP”. Countries “running persistent deficits should boost national savings” and countries with persistent surpluses should “boost domestic sources of… Read more
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Exchange rates and global rebalancing
5th November 2010
Since the beginning of the fall, the Framework for Strong, Sustainable and Balanced Growth launched at the G20 meeting of Pittsburgh one year ago seems to have degenerated into a “currency war” whereby each country would like to enjoy a weak currency. The logic of the Pittsburgh framework was to engineer a rebalancing of world demand from the public to the private sector, and from deficit to surplus countries. Consistently, domestic demand would be boosted in countries like China, Germany or oil-exporting countries, whereas it would grow more slowly in the United States or the United Kingdom. An agnostic view was initially taken on exchange rates, since the aim was that of rebalancing, not of exchange-rate coordination. True, the rebalancing… Read more