Sarkozy Can Help the Euro—and Himself

Date: 30-11-2011
Source: The Wall Street Journal

For much of the past two years, Germany has endured a lot of criticism for its approach to the euro-zone crisis, not all of it fair. Some say it is guilty of ingratitude, failing to acknowledge how much of its own economic success is due to membership of the euro zone; many believe it has misused its political and economic power to impose ill-judged austerity policies on its European neighbors, worsening their economic crises; and it is accused of a lack of solidarity for refusing to allow policies that might end the crisis, such as greater European Central Bank intervention and the creation of common euro-zone bonds. The result is that Chancellor Angela Merkel can expect to receive much of the blame if, as some now expect, the common currency breaks up.

There is an element of truth to these criticisms. Germany has certainly often been slow to appreciate the consequences of its actions. It underestimated the speed and severity of the contagion that arose after it insisted on imposing losses on private-sector owners of government bonds as a condition of future bailouts; it failed to anticipate the devastating impact on confidence of Ms. Merkel’s statement that Greece could leave the euro; and even now, Germany may be underestimating the seriousness of the current crisis—in particular how far the sovereign-debt crisis reflects a loss of confidence in the wider market rather than a lack of credibility in national fiscal policies.

Insight: In euro zone crisis, companies plan for the unthinkable

Date: 30-11-2011
Source: Reuters

When Novo Nordisk’s chief financial officer met marketing colleagues last Friday the conversation moved far beyond the usual discussion of sales and performance. Jesper Brandgaard asked a simple, far-reaching question: how would the firm set prices for two pivotal new insulin products if the euro collapsed?

The Danish firm, the world’s biggest maker of insulin for the treatment of diabetes, sits outside the euro zone but sells into it. It’s a question that is being echoed – in various forms – in the boardrooms of banks, brokerages, trading houses, law firms and the world’s leading manufacturers.

„It’s hard to make detailed plans but we need to think through how our pricing strategy would fare if there were suddenly a dismantling of the euro,“ Brandgaard told Reuters. „How do we avoid falling into a trap? This is the first time I’ve asked such a question. It’s a topic that is increasingly on the radar.“

Lüder Gerken: Inflationsrate von 10 Prozent?

Ökonom unterstützt Position Berlins

Angesichts der europäischen Schuldenkrise hat der deutsche Ökonom Lüder Gerken vor einer Inflationsrate von knapp unter zehn Prozent in der Euro-Zone gewarnt. Das würde für Österreich beinahe eine Verdreifachung der derzeitigen Inflationsrate bedeuten. Nach Gerkens Meinung könnte die Teuerung auch noch weiter emporschnellen, wenn Deutschland dabei nicht als Bremser fungieren würde.

orf.on, 30/11. Er rechne damit, dass die meisten Regierungen in der Euro-Zone und die Europäische Zentralbank (EZB) politisch eine Inflationsrate von knapp unter zehn Prozent in Kauf nähmen, „in der Hoffnung, dass die Deutschen dabei nicht allzu sehr aufmucken“, sagte der Vorsitzende des Freiburger Centrums für Europäische Politik der „Neuen Osnabrücker Zeitung“ (Dienstag-Ausgabe).

How Could China and the BRICs Support the Eurozone?

Author: Dan Steinbock · November 28th, 2011 RGE EconoMonitor

The Eurozone is edging toward a financial abyss. China and the BRICs could contribute to a solution, but only through compromise.Recently, the President of the European Commission (EC) Jose Manuel Barroso warned of a crash that would instantly wipe out half of the value of Europe’s economy, plunging the continent into a depression as deep as the 1930s slump.It was a serious warning, and it was too little too late.Today, the EU and China are each other’s largest trading partners. In the Western media, China is often portrayed as awash with cash, primarily due to its large $3.2 trillion foreign exchange reserves.China’s reserves are for the most part invested in long-term sovereign debt instruments. However, China and the BRICs could be part of a solution. That, however, requires compromise.

The Eurozone’s Expectations

In the past, the Eurozone problems were resolvable because the peripheral countries – Greece, Ireland, and Portugal – each represented less than 3 percent of the Eurozone economy.

It’s All Very Taxing

‎29. ‎November ‎2011, John Mauldin

Today’s Outside the Box is something a little different for me. Howard Marks of Oaktree Capital Management has produced a most excellent summary of the problems inherent in „all things taxing“ in the US. He delves into not only the specifics but also some of the philosophy of taxation. This is a balanced piece in which he tries to present all sides and arguments, giving us a very real picture of the dilemma we face, and leaving us to draw our own conclusions. Whatever we do going forward, including nothing, the outcome with regard to taxes is going to be difficult if not painful for most of us. We talk about everyone paying their fair share, but what does that mean? The answer is that it means very different things to different people.

This goes hand in hand with my contention that we face very difficult choices, and none of them are pain-free. I have my preferred methods and choices, and you have yours, and your neighbors have yet more divergent views. But we must make the tough decisions, or the market is going to treat us as roughly as it is Italian debt. If we let it get to that point, the choices will be even more limited and painful.

Foreign Policy: The Top 100 Thinkers 2011

http://www.foreignpolicy.com/articles/2011/11/28/the_fp_top_100_global_thinkers?print=yes&hidecomments=yes&page=full

Darunter Rankings der Ökonomen: 

Italy’s Debt Must Be Restructured

Author: Nouriel Roubini · November 29th, 2011 Financial Times

It is increasingly clear that Italy’s public debt is unsustainable and needs an orderly restructuring to avert a disorderly default. The eurozone’s wish to exclude private sector involvement from the design of the new European Stability Mechanism is pig-headed – and lacks all credibility.

With public debt at 120 per cent of gross domestic product, real interest rates close to five per cent and zero growth, Italy would need a primary surplus of five per cent of gross domestic product – not the current near-zero – merely to stabilise its debt. Soon real rates will be higher and growth negative. Moreover, the austerity that the European Central Bank and Germany are imposing on Italy will turn recession into depression.

Schuldenkrise: Wie Deutschland die Verträge ändern will

Mehr Kredit gegen neue Regeln: Die Deutschen wollen die EU-Verträge ändern, um die Schuldenländer zu disziplinieren. Wie sehen die Pläne aus?

• Von: Albert Funk | Albrecht Meier, Zeit Online
• Datum: 29.11.2011 – 11:52 Uhr

© Robert Schlesinger/dpa

Bundeskanzlerin Angela Merkel im Bundestag

Schuldensünder in der Euro-Zone sollen künftig stärker an die Kandare genommen werden als bisher – dieser Grundgedanke steckt hinter einer Änderung des EU-Vertrages von Lissabon, für die sich vor allem die Bundesregierung stark macht. Mit Frankreichs Präsident Nicolas Sarkozy hat Kanzlerin Angela Merkel (CDU) bei ihrem Vorhaben, den EU-Vertrag zu ändern, einen wichtigen Verbündeten gefunden. Aber dennoch ist unklar, ob das Projekt einer Vertragsänderung so verwirklicht wird, wie sich die Bundesregierung dies derzeit vorstellt.

Warum wird überhaupt jetzt eine Vertragsänderung diskutiert?

Es sind nicht zuletzt die Finanzmärkte, die die Debatte über eine Neufassung des EU-Vertrages erzwungen haben. Auch am Montag erreichten die Zinsen für italienische Anleihen wieder mehr als sieben Prozent, und auch in Belgien stiegen die Zinsen für zehnjährige Staatsanleihen auf ein Niveau, auf das sie zuletzt vor über zehn Jahren geklettert waren. Weil damit auch die Gefahr eines Auseinanderbrechens der Euro-Zone anhält, stehen die Mitgliedstaaten der Gemeinschaftswährung unter Zugzwang. Sie müssen gegenüber den Märkten den Beweis antreten, dass sie ihre Schuldenprobleme in den Griff bekommen. Wenn dies durch eine Änderung des EU-Vertrages festgeschrieben würde, wäre das auch ein kraftvolles Signal an die Märkte.

Crisis in Europe Tightens Credit Across the Globe

November 28, 2011, NYT

By ERIC DASH and NELSON D. SCHWARTZ

Europe’s worsening sovereign debt crisis has spread beyond its banks and the spillover now threatens businesses on the Continent and around the world.

From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets.

The result is a credit squeeze for companies from Berlin to Beijing, edging the world economy toward another slump.

The deteriorating situation in the euro zone prompted the Organization for Economic Cooperation and Development on Monday to project that the United States economy would grow at a 2 percent rate next year, down from a forecast of 3.1 percent growth in May. It also lowered its economic outlook for Europe and the rest of the world, and a credit contraction could exacerbate the slowdown.

Germany told to act to save Europe

Date: 29-11-2011
Source: The Financial Times

Polish foreign minister Radek Sikorski: ‘I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity’

Germany is the only country in Europe that can act to save the eurozone and the wider European Union from “a crisis of apocalyptic proportions”, the Polish foreign minister warned on Monday in a passionate call for more drastic action to prevent the collapse of the European monetary union.

The extraordinary appeal by Radoslaw Sikorski, delivered in the shadow of the Brandenburg Gate in the German capital, came as the Organisation for Economic Co-operation and Development called on European leaders to provide “credible and large enough firepower” to halt the sell-off in the eurozone sovereign debt market, or risk a severe recession.

The OECD’s comments came as the organisation slashed its half-yearly forecasts for growth in the world’s richest countries, warning that economic activity in Europe would grind to a near-halt.

Yet their calls were met by a stubborn insistence in Berlin that only EU treaty change to forge a “stability union” in the eurozone would revive confidence in the markets.