Thursday, August 11, 2011

Soros on the Euro Crisis

Here:
Germany and the other eurozone members with AAA ratings will have to decide whether they are willing to risk their own credit to permit Spain and Italy to refinance their bonds at reasonable interest rates. Alternatively, Spain and Italy will be driven inexorably into bailout programs. In short, Germany and the other countries with AAA bond ratings must agree to a eurobond regime of one kind or another. Otherwise, the euro will break down.

It should be recognized that a disorderly default or exit from the eurozone, even by a small country like Greece, would precipitate a banking crisis comparable to the one that caused the Great Depression. It is no longer a question whether it is worthwhile to have a common currency. The euro exists, and its collapse would cause incalculable losses to the banking system. So the choice that Germany faces is more apparent than real – and it is a choice whose cost will rise the longer Germany delays making it.

Krugman Stands Up for France

Here. No doubt Sarko will claim victory.

Juppé Speaks the Truth About the Golden Rule

When Alain Juppé was still on the outside of government looking in, he quite clearly expressed the reason why the "golden rule" that Sarkozy wants to make the centerpiece of French fiscal reform is nonsensical eyewash:



Interrogé, page 158, sur la manière de remettre de l'ordre dans les finances de la France « sans risquer de la plonger dans la déflation », voici ce que répondait Juppé :

« Ce sera extrêmement compliqué. L'une des réponses, dit-on, serait d'inscrire dans la Constitution, comme les Allemands l'ont fait, qu'on n'a pas le droit de dépasser un niveau d'endettement ou de déficit supérieur à un pourcentage donné du PIB. Je ne suis pas contre, mais je n'y crois pas trop.
Cela ne consisterait qu'à se faire plaisir et on expliquera, à la première crise grave, que des circonstances exceptionnelles font qu'il n'y a plus d'autre moyen que de violer la Constitution. La nécessité comme la facilité l'imposeront. Il n'y aura personne ou presque pour s'y opposer et il suffit, pour s'en convaincre, de voir ce qui s'est passé avec le Pacte de stabilité et de croissance au respect duquel tous les Etats qui ont adopté l'Euro s'étaient, pourtant, obligés par traité.
Là aussi, il y avait des pourcentages de déficit et d'endettement au-delà desquels on ne devait pas aller et qu'est-ce qui s'est passé ? Tout le monde s'est affranchi de cette règle sous le coup de la crise financière et même, en réalité, bien avant. On a maintenant beaucoup de mal à y revenir et cette idée d'obligation constitutionnelle n'est donc pas la panacée, même si ça peut faire du bien dans le paysage. »

One might say that this passage exemplifies the difference between the American right and the French right. The French right has many politicians who, when not in office, are quite capable of thinking intelligently and stating plain truths forthrightly. The American right is now so besotted with its antistate ideology that it has become what the French right used to be, "la droite la plus bête au monde." 

Poll: French Trust Merkel More than Sarkozy

When it comes to leading the way out of financial crisis, the French man in the street apparently trusts Angela Merkel (46%) and the IMF (41%) more than Nicolas Sarkozy (33%). Of course only 48% trust themselves, so we must take these figures with a grain of salt. In any case, the French surely know less about Merkel than they do about Sarkozy, and in this case ignorance breeds respect. And so does Merkel's niggardly attitude toward bailouts: the French are no more eager to help out their neighbors than the Germans, it seems, even if in the end they're undermining themselves.

French Lending to Asia

French banks, it turns out, are big lenders to Asia, so the troubles in French banking pose a potential threat to Asian economies.

European Sovereign Credit Default Swaps

Prices of credit default swaps on the sovereign debt of various countries can be found here. France (167.8) is judged by the market to be about twice as risky as Germany (83.8) and three times as risk as the US (54.4) but is not in the same league as Greece (1726) or Ireland (777).

If you believe the market ...