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Analysis and Comment (73)

European Central Bank President Mario Draghi has called for fiscal policy to lead the way in ending the Eurozone recession. AAP/EPA/ARNE DEDERT

Draghi calls for spending to rescue Euro – but will governments do ‘whatever it takes’?

In July 2012 European Central Bank president Mario Draghi famously announced that the ECB would do “whatever it takes” to rescue the Euro. And he added: “Believe me, it will be enough.” In fact, it has…
Positive interest rates meant Euros were stuck in the bank. Mario's Planet

Explainer: why does the eurozone need a negative interest rate?

It’s not unusual for central banks with economies to revive to let their interest rates go negative in “real” terms by keeping them below the rate of inflation. The eurozone, the US and the UK have done…
Greece is still an economic mess, and the far right is benefiting. EPA

Why did Europe lurch right? Because the ‘recovery’ is a farce

I was trained as an economist, but that does not mean I think economics determines absolutely everything. However on occasion the impact of economic factors proves so strong that the causality is obvious…
A World Bank report gives a hopeful forecast for global growth. Image sourced from www.shutterstock.com

Growth spurt hopes for global economy, but challenges remain

The World Bank’s Global Economic Prospects report released this week is moderately optimistic about the short-term outlook of the global economy. World Bank economists anticipate an improvement in most…
“The euro has backfired: it is holding back growth and job creation; and it is dividing Europe.” Stefan Rousseau/PA

Nobel laureate: tough choices for a troubled euro

One of the most exciting things about working at the LSE is that we get to hear some of the world’s top thinkers and policymakers. One occasion that I recall vividly is the visit of two great Europeans…
Where now for European banks? MPD01605

This is how the EU can fix its failed banks

The EU has made progress on the construction of a banking union, by agreeing on common rules for dealing with failed banks. The downside is that these rules won’t kick in until 2015: the Eurozone faces…
Could a new method of measuring structural deficits mean easing austerity pressures on troubled Eurozone economies? Chema Sanz via Flickr

Potentially less austerity for the troubled Eurozone

The EU Commission’s autumn economic forecasts are due tomorrow. What makes this event special this year is that there are rumours about a possible change in the Commission’s approach to calculating the…
Dark clouds are gathering over Slovenia. lassi.kurkijarvi

The downfall of Slovenia, and why it matters for Europe

The eurozone crisis appears to have a new victim: Slovenia. To avoid the need for a bailout, the IMF has called on the country to immediately recapitalise its banks. This should worry the rest of Europe…
The ECB’s decision to consider purchasing government bonds led to relief in many troubled Eurozone economies. AAP

Good news from the Eurozone … or is it?

Finally good news from the Eurozone! According to recent Eurostat estimates the combined economy of this troubled region grew by 0.3% in the second quarter of 2013 after shrinking for six subsequent quarters…
Greece: not just riots and unemployment. flikr/Imagaday

Europe’s latest investment opportunity … Greece

The IMF has conceded that mistakes were made in the way the first Greek bailout in May 2010 was handled. Its report suggests the need to refine the fund’s lending policies to accommodate for conditions…
The Euro crisis has finally arrived at the economic heartland of Germany; but the road to recovery may be the same for the Eurozone core powers as the peripheral economies. AAP

The Euro crisis has arrived in Germany: but is a recession scenario plausible?

Last week the German government’s economic forecasts for 2013 have made clear that the Euro crisis will have a serious economic impact on Germany, with the economic growth projection cut down to a mere…
Re-run: if the US fiscal cliff has the same feel as last year’s debt ceiling crisis, we’re not surprised…

2012, the year that was: Business and Economy

Different year, same crisis. Around this time last year, the United States was looking down the barrel of economic disaster with the debt ceiling. As we approach 2013, it peers over the fiscal cliff. That…
With the implementation of the Single Supervisory Mechanism, European Central Bank chief Mario Draghi has taken a major step towards greater financial integration in the Eurozone. AAP

EU banking union is a decisive step towards saving the euro

Last week was one of mixed fortunes for the Eurozone. The week began badly with news that Italy’s Prime Minister Mario Monti was resigning due to Silvio Berlusconi’s withdrawal of parliamentary support…
The US Federal Reserve has extended its bond-buying program, but will it be effective in boosting the economy? Image from www.shutterstock.com

More money, more problems? The quantitative easing quandary

In an attempt to bolster the economy, the Federal Reserve announced a fresh round of bond purchases to replace Operation Twist, the stimulus program that is set to expire this month. It will spend $US45…
Tackling France’s mounting sovereign debt will prove challenging for French President François Hollande. AAP

There are no easy solutions for France’s economic woes

Pressure is mounting for the recently elected French Socialist president, François Hollande and his government to address France’s sovereign debt, which is currently at a post-war record of 91%. France…
Show of unity: Spain’s King Juan Carlos (centre) supported austerity cuts by Prime Minister Mariano Rajoy - but expressed concern about their impact on Spanish youth. AAP

Spain faces brain drain as its youth looks for a future abroad

Half of Spain’s youth (that is, those under the age of 25) are now officially unemployed, while overall unemployment in Spain stands at 24.4%, according to the latest figures released by the Spanish Institute…
In the aftermath of the Greek elections, there have been renewed calls to accompany austerity measures with pro-growth policies.

Austerity and growth: trying to make sense of a contradiction

Having read that the outcome of the Greek elections points to a continuation of the push for fiscal austerity in that country, my heart sunk. Then I see that our own Prime Minister has been quoted as telling…
Greece’s citizens are faced with an unenviable choice. EPA/Orestis Panagiotou

Greece’s choice: bargaining versus pleading

When two sides bargain, their interaction reflects a potential mutual benefit but also a measure of conflict. For instance, when a firm and its supplier reach a deal, there is often more than one price…
Alexis Tsipras, leader of the Coalition of the Radical Left (Syriza) party, has proposed the cancellation of Greece’s agreements with the European Union and the IMF. AAP

With Europe at debt’s door, the future hinges on Greece’s election result

All eyes are on Greece this weekend for the second legislative election in five weeks. This is no ordinary election: the global implications of the outcome might be significant. Griffith University lecturer…
Alexis Tsipras will lead Syriza to the polls on June 17. EPA/Orestis Panagiotou

Greek elections: the heart of contradiction

To free the age from its captivity, To create a brand new world, The discordant, tangled days Must be linked, as with a flute. –Osip Mandelstam, The Age (1923) There is an air of impending disaster in…
If Australia had been founded according to the Eurozone model, our current economic situation would look very different. adam79

Australia and the Eurozone: a counterfactual account of economic history

Suppose that in 1901 Australia’s founding fathers had designed the Commonwealth differently. The states were to retain all powers to tax and had to finance themselves (including health, education and social…
Spanish Prime Minister Mariano Rajoy: banks are bailed, but just a brief respite? AAP

Spanish bailout buys time for eurozone - but only a little

The positivity off the weekend’s news that Spain’s banks will receive rescue loans of up to 100 billion euros from eurozone finance ministers appears short-lived. Despite it being well-received in Asian…
Following the EU summit in Brussels this week, it seems eurobonds are back on the agenda. But will it be what it needed to save the Eurozone? AAP

Will (Euro)bonding help solve the euro crisis?

The special EU summit held in Brussels on Wednesday revamped the discussion on Eurobonds (i.e. the issuance of common government bonds to pool the Eurozone debt liability) as a possible option to address…
Austerity’s political cheer squad: but is the game over? G8 countries have committed to growth by setting sights on employment.

Why do our world leaders cling to the dismal politics of economic austerity?

The lingering commitment to austerity of leading Western politicians in the face of impending economic tragedy is beyond belief. The dismal science is a sobriquet often wrongly applied to economics, but…
During the Great Depression, policymakers had an irrational - and detrimental - attachment to the gold standard. Should we be worried about the similar fervour for a strong euro? BullionVault

When it comes to solving the euro’s woes, it’s the same gold story

Are the tragedies of the 1920s repeating themselves in the twenty-first century? In the 1920s, an irrational attachment to the gold standard helped cause the Great Depression, as European fears of inflation…
German chancellor Angela Merkel and France’s new President Francois Hollande meet to discuss Europe’s economic woes. EPA/Rainer Jensen

Hollande and Merkel: breaking up is hard to do

Europe is in economic dire straits and the two most powerful economies on the continent are, at least on paper, led by individuals with considerable differences. The previous French President Nicolas Sarkozy…
Greek citizens took their frustration out on the ballot box this weekend. EPA/Orestis Panagiotou

Elections in Europe an assault on the austerity doctrine

The answer, even though they see over and over again that austerity leads to collapse of the economy, the answer over and over [from politicians] is more austerity. – Joseph Stiglitz, Asian Financial Forum…
The European Central Bank’s long-term refinancing operations have reduced acute liquidity problems in the banking sector, but the situation in the Eurozone remains fragile. AAP

The ECB’s long-term refinancing operations: a solution to the debt crisis, or doomed to fail?

In November 2011, the Eurozone crisis reached a climax with interest rates on sovereign debt of Eurozone problem debtors soaring. Fear of sovereign defaults spilled over into the interbank markets as Eurozone…
Plans by Spain’s new conservative government to push through deep labour reform has provoked protests, as it struggles to tackle its soaring unemployment rate. AAP

Spain strikes against TINA, as the Eurozone watches on

Spain’s general strike last week has sent a clear message to other Eurozone countries about how challenging it may be to implement labour market reform. The strike was mostly peaceful, with the exception…
Not so funny…. Portugal is the next vulnerable Euro nation, but it doesn’t fit the German-favoured critique of a profligate country unwilling to undertake reforms. AAP

After the Greek rescue package: will Portugal be the next to fall?

Greece is rescued, for now…maybe. Perhaps it’s time to move on to the next basket case. So, which of the PIIGS is the next Greece? For the moment, Portugal looks to be the front-runner. The country’s public-debt-to-GDP…
Protests rocked Athens as Greek legislators voted to accept a tough austerity package. So what now for the Greek people? AAP

Austerity in, Euro out – is this Greece’s future?

As Greek politicians approved a tough austerity package amid fierce protests, one question dominates: is an orderly exit from the Eurozone available for Greece? And just what might be the consequences…
French leftists protest after Standard & Poor’s downgraded the country’s debt on Friday. AAP

After France’s downgrade, Europe’s debt cycle looks hard to break

Standard & Poor’s decision to downgrade the credit ratings of nine Eurozone countries, including Austria, France, Italy, Spain, and Portugal, is another symptom of the contagious and vicious debt cycle…
British Prime Minister David Cameron had no choice but to reject the EU plan and was right to do so. AAP

Why Cameron can’t afford to get fiscal with the EU

Last week’s EU Brussels summit produced a tentative fiscal compact, a mild boost of the European Financial Stability Facility’s (EFSF) reserves to €500 billion, and an acrimonious split between Britain…
Despite happy appearances, the two leaders disagree the way out of the Eurozone crisis. AAP

A make-or-break week: Can Sarkozy and Merkel save the euro?

What could be a decisive week for Europe and its common currency has begun, with the announcement of a package of fiscal austerity measures in Italy. Markets, European partners, and – perhaps above all…
The European Central Bank needs to start buying more bonds from Eurozone countries. Images_of_Money

With Italy stagnant, it’s time for drastic Euro intervention

The departure of Silvio Berlusconi does not seem to have eased the pressure on Italy, with reports suggesting the International Monetary Fund is reading a 600 billion euro emergency bailout for the Eurozone’s…
The eurozone crisis is moving beyond “spendthrift” countries in need of rescue, to the rescuers themselves. AAP

Heart of darkness – entering the Eurozone’s end game

Early this week, sovereign bonds spreads for France and other Euro-core countries peaked. Around noon on Tuesday the spreads on French and Austrian 10-year government bonds exceeded the German bund rate…
Angela Merkel and Nicolas Sarkozy must take drastic steps to maintain the legitimacy of EU institutions. AAP

It’s time for Europe to show some courage

The European Union is in crisis – yet again. If you enter “Europe in crisis” into Google, more than 655 million entries pop up. Europe’s current problems are being described as a Euro crisis – it is a…
Former EU commissioner Mario Monti will form government in Italy as Silvio Berlusconi exits. AAP

Here come the technocrats, to save the Eurozone

Is the Eurozone about to crash and burn, leaving Club Med in its wake? Not so fast. Reports have suggested that French President Nicolas Sarkozy and German Chancellor Angela Merkel have discussed a strategic…
Italy’s debt woes will not disappear after Berlusconi finally steps down. AAP

As the Eurozone teeters, Italy has no time to waste

Global markets have tumbled in the past 24 hours on fears over Italy’s worsening debt crisis, with media reports that Germany and France have begun talks to break up the Eurozone if the monetary union’s…
Berlusconi’s resignation is one step towards solving Italy’s debt crisis – but many more are needed. AAP

Berlusconi’s going, but there’s no Silvio bullet for Italy’s debt

Italy’s sovereign debt crisis has been overshadowed by Prime Minister Silvio Berlusconi’s reluctant promise to resign after the country’s parliament made clear he no longer commanded a majority. Italy…
Greek Prime Minister George Papandreou will use the referendum to try to win a mandate for austerity measures. AAP

Pain or more pain? The political gamble behind Greece’s debt referendum

Greek Prime Minister George Papandreou has taken the bold step of planning a referendum on the country’s EU-imposed austerity measures, in a bid to claim a mandate for his efforts to avoid a default on…
The first free elections borne from the Arab Spring were held in Tunisia. Over 90% of registered adults voted. EPA/Zacarias Garcia

Tunisian hope and Greek despair: A week in the life of democracy

It has been a tumultuous week in the life and times of democracy in the Mediterranean. Seven days punctuated by joyous hope and its ugly opposite, sullen despair. The promising news came from Tunisia…
Slovakian Prime Minister Iveta Radikova’s government was a political victim of the continuing Euro debt crisis. AAP

Slovakian political crisis highlights fragility of Eurozone debt solution

The Central European country of Slovakia has finally ratified the EU bailout fund – but not before its initial refusal caused a spill of the Slovakian government and highlighted the deep political divisions…
Euro banks have been urged to reinforce their balance sheets. AAP

Can ‘living wills’ protect the banking system?

Eurozone leaders have moved to address liquidity fears, with the European Central Bank announcing new measures to head off a credit crunch. Britain has also announced quantitative easing measures. Outgoing…
Italian Prime Minister Silvio Berlusconi’s austerity measures are misdirected and too dramatic. AAP

As Moody’s trashes Italy, voters can’t count on Berlusconi

The move by international ratings agency Moody’s to cut Italy’s credit rating for the first time in two decades will do little to ease concerns about the Eurozone’s debt crisis, despite global markets…
Is a partial default one of the steps to recovery for Greece? AAP

Defend or default? It’s the three trillion euro question

Will Greece default and exit the Eurozone? The best-case scenario is a managed, orderly, partial default with the European Financial Stability Facility (EFSF), a fund created in 2010 to manage Eurozone…
If Greece’s economy collapses, it could easily lead to a breakdown of civil order. AAP

What will happen if Greece defaults?

Global markets look set for a rough week amid new concerns that Greece could default on its massive debt. The Australian share market has spent most of the day down 3% after reports that Germany could…
While the US is finding its footing, China is looking to expand its global economic power by pushing for the renminbi importance in international transactions. Fotopedia/Philip Roeland

How the West’s money problems could hasten global power shift

The downgrading of US debt by Standard & Poor’s may sound the starting gun for an enduring rebalancing of global economic power. For decades, investors worldwide sought the safety of US government…
German chancellor Angela Merkel and French President Nicolas Sarkozy have outlined a rescue plan for the Eurozone. AFP

PIIGs might fly - is a single economic government the way forward for Europe?

German Chancellor Angela Merkel and French president Nicolas Sarkozy have overnight laid out plans for a stronger European integration that seeks to control deficit restrictions on member countries and…
The only way out of this crisis is to dishonour some of the debt that is weighing down the global economy. AAP

Ireland, Greece … France? Accepting default is Europe’s only option

The dramatic falls in share prices of Greek debt-laden French banks overnight highlights just how closely tied the current market chaos is to the world’s worsening debt woes. Market crashes like that of…

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