Greek Competitiveness Is Not the Issue, Fiscal Discipline Is

By: Erik Jones

The simple fact of the matter is that Greece is having a fiscal crisis. It would have had that crisis whether or not it was in the eurozone.

Europe in Dire Straits – don’t be Brothers in Arms.

By: Henrik Enderlein

The case against bailing out Greece.

How should the Eurozone handle Greece?

The political pros and cons for no support, a European rescue and a call for the IMF.

The Euro Area's political constraints

By: Wolfgang Münchau

Not all policy solutions are possible in a monetary union. There are severely constitutional constraints.

Greek Crisis: Ending (at last) the Trojan War

By: Jacques Delpla

A peace initiative with Turkey could reduce Greece´s expenditures by 3pp of GDP.

When Does It Hurt?

By: Ansgar Belke

The exchange rate “pain threshold” for German exports is at $1.55 to the euro.

Fiscal policy in Central and Eastern Europe

By: John Lewis

Countercyclical but deteriorating with EU membership.

Why the Euro will continue to weaken

By: Wolfgang Münchau

When you consolidate the fiscal position, either the private sector deteriorates, or the current account has to improve. This would either imply, or necessitate, a depreciation.

Eurozone Meltdown

This is the first in a new series of regular briefing notes on important issues facing the euro area. In this briefing note we are asking whether the euro area could ever break up. We think not. But we are not as certain as we used to be.

'Swap Tango' – A Derivative Regulation Dance: Part 2

By: Satyajit Das

Banks and their lobbyists do not believe that there is a case for regulation. Banks argue that the complex nature of derivative trading dictates that self-regulation is the only feasible approach. If that fails, then banks seek to minimise scrutiny of major issues, such as the size of the market, speculative activity, pricing issues, complexity and mis-selling of derivatives to unsuitable clients. They argue that existing regulations already adequately cover some issues. Proposed regulations will be masterfully narrowed to minimise impediments to profitable activities.

Greek Competitiveness Is Not the Issue, Fiscal Discipline Is

By: Erik Jones

With all due respect to my colleagues in the economics profession, they have jumped the gun on Greek competitiveness within the eurozone. The simple fact of the matter is that Greece is having a fiscal crisis. It would have had that crisis whether or not it was in the eurozone. Greece is not having a crisis of competitiveness. Hence joining the eurozone was not the problem; leaving it is not the solution.

Europe in Dire Straits – don’t be Brothers in Arms.

By: Henrik Enderlein

On 30th October 1975, the New York Daily News titled: “FORD TO CITY: DROP DEAD” - referring to the refusal of the US-President to provide financial assistance to the New York City government (at that time in serious debt difficulties). Today, this headline is a perfect guide to handling the situation with Greece. Instead of muddling through and changing the basic rules of the euro-area, European leaders should now send a clear message and tell markets that there won’t be a bailout for Greece.

'Swap Tango' – A Derivative Regulation Dance: Part 1

By: Satyajit Das

Politicians and regulators globally are currently busy drafting laws to regulate derivatives. A common theme underlying the activity is an absence of knowledge of the true operation of the industry and the matters that need to be addressed. As Goethe observed: "There is nothing more frightening than ignorance in action."

Germany’s Chinese New Year and What to Do About It

By: Adam S. Posen

In 2009, China displaced Germany as the world’s largest exporter. But Germany starts 2010 sharing a common dilemma with China: how to sustain growth, when those markets locked into a fixed exchange rate with it need real adjustment

Why I worry more about Spain than about Greece

By: Wolfgang Münchau

After a decade of not always constructive ambiguity, the European Union now has a bailout rule. It goes as follows: A bailout shall be granted to any country that subsequently complies with a brutal adjustment programme, dictated by the EU. I suspect that Greece, being the first country in trouble, being small and sufficiently scared, will comply with all the conditions. Maybe Greece will not need a bailout. I still suspect that it might. But in any case, we have established a new principle. Whereas previously nobody was really sure what would happen in such a case, we now know that there are specific cases in which a bailout is likely.

Greek Crisis: Ending (at last) the Trojan War

By: Jacques Delpla

The solution to the Greek fiscal crisis will need a return to Homer’s Iliad: ending at last the Trojan War. Despite markets’ fears, Greece will not default on its debt. Why? Because, with some diplomatic impetus, Greece could easily reduce its military spending by 3 points of GDP, if a multilateral peace initiative is launched between Greece, Turkey and Cyprus, with the help of the US and of the Europeans. Unlike Portugal or Ireland, Greece could benefit from significant peace dividends to reduce its titanic deficits.

How to rescue a bank without regret

By: Reint Gropp and Jan Pieter Krahnen

During the recent financial crisis almost all bank rescue operations followed the same myopic script: once a troubled bank reports its troubles, a rush for resurrection sets in, frequently on a Friday evening after close of business. The authorities have only two and a half days, from Friday to Sunday, to find a workable solution. On Monday morning, before the opening of the markets on the other side of the globe, a water-tight rescue plan has to be presented to the public. More often than not, the bank will be bailed out with public money. This rewards excessive risk taking and weakens the position of the bank’s competitors. Both effects decrease social welfare and financial stability over the medium term. At the same time, the seeds for the next crisis are planted.