Grexit: It’s a question of how, not if, Greece will leave the euro

Posted: May 26th, 2012 | Author: | Filed under: Economics | Tags: , , , , , , , | No Comments »

Over at Foreign Exchange, I’ve got a post up on the euro. Short version: all signs now point to a Greek exit, and Christine Lagarde has given a statement indicated there is no turning back.

It sounds as if she’s essentially saying to the Greeks and others in Europe, you’ve had a nice time and now it’s payback time.

“That’s right.” She nods calmly. “Yeah.”

And what about their children, who can’t conceivably be held responsible? “Well, hey, parents are responsible, right? So parents have to pay their tax.”

That fits entirely with the strict language she used when I interviewed her in August:

She knows this is a tough sell. “You first have a period [after making cuts] where growth takes a hit and goes negative”—and with that come unavoidable human costs in lost jobs and social services. Political feuding over controversial cuts will only make the pain worse. How should ordinary people cope? She pauses. “It takes courage.”

What are the implications of this tough stance:

Hypothetically, should Germany refuse to loosen the terms of its loans to Greece, the IMF could offer a bit of rope on its loans to Greece that would allow a left-wing Greek government to save face without upsetting the eurocart. But. as those of us who have followed her closely expected, Lagarde has unequivocally squashed that possibility in her remarks tonight.

Read the whole post here.


Europe’s constitutional literalism

Posted: November 5th, 2011 | Author: | Filed under: Economics | Tags: , , , , , | No Comments »

Some frustrated words about the state of European political economy:

What we have, in other words, is a meta-debate about whether policy options are permissible, instead of a debate about whether they are sound. A debate in which what is permissible is defined narrowly, as whatever is specifically ‘foreseen’ in documents written years ago, instead of broadly, as whatever those documents do not explicitly forbid. And a debate in which it is hard to avoid the conclusion that policy options are being construed as impossible because they are politically unpalatable to the people who would have to carry them out.

More here.


First Thoughts on the Eurozone Summit

Posted: October 27th, 2011 | Author: | Filed under: Economics | Tags: , , , , | No Comments »

Burning a bit of midnight oil – a post up at Foreign Exchange on the eurozone summit and its results. Really short version: ‘It is hard not to see a game of hot potato at play here which eventually has to come back to the ECB.’

Read the whole post here.