Euro Area

[Brenus]

"You can always move to the Balkans then." Not before I buy my house near the Danube, thanks. Have to keep the price down and avoid the Croatian Coast (cost) syndrome...

[Furunculus]

You can always move to the Balkans then.

AII

no thanks, i get my fill from our wonderful adversarial winner-takes-all system of politics right here in britain.

a federal brussels has NOTHING to offer me.

[Fragony]

"You can always move to the Balkans then." Not before I buy my house near the Danube, thanks. Have to keep the price down and avoid the Croatian Coast (cost) syndrome...

With the Croation syndrome I mostly think about 9/10 women being born as a supermodel. It's madness.

[gaelic cowboy]

Resilient Ireland plays cards right to ensure happy ending

The highly respected Financial Times yesterday hailed many positive economic indicators emerging in Ireland's favour, explaining how hard-earned progress to date could be a trump card in transforming our fortunes, and those of the Eurozone

Spoiler Alert, click show to read: 

By David Vines and Max Watson

Thursday August 18 2011

Markets and rating agencies, not to mention academics, often make egregious errors in judging country risk. All too often this is by failing to notice a change in macroeconomic fundamentals that really does matter. As the crisis moves through its nadir, one major error is almost certainly the market assessment of Ireland's public debt.

As a group, the troubled periphery economies have faced three challenges: achieving a leap in competitiveness that will restore growth; convincing markets that public debt is on a sustainable track; and normalising the access of banking systems to market funding. These three challenges have become inextricably linked. In Greece, deep-rooted fiscal problems have infected the financial system. In Ireland a banking debacle has swollen public debt. And without strong competitiveness to relaunch growth, this aggregate debt dynamics story can have no happy ending at all.

So the first and most important thing about Ireland is that it is swiftly restoring its competitive edge. Indeed it is moving rapidly towards a sizeable current account surplus -- in a range of 3pc to 4pc of gross domestic product. Of course, recession has also played a role in turning external accounts around, but a steady uptrend in exports has been under way for some time.

The second element is that Ireland's net public debt will probably peak at somewhere around 110pc of GDP. This is a steep challenge; but it is a magnitude that Ireland, among other advanced countries, has shown to be entirely scalable in the past. It is increasingly clear, too, that Ireland does not need to borrow from markets until 2014: that is the sort of borrower that markets can relearn to love.

The third issue is Ireland's banking saga. The Achilles heel of the economy lay in bad bank governance and supervision, and a subsequent hard landing that neither the authorities nor the International Monetary Fund saw coming. But today there is a growing recognition that this corner has been turned. Steps were finally taken at the end of March to cauterise the problem with recapitalisation based on a tough set of stress tests; and a sharp division of core from non-core assets in the two "pillar" banks that are left. The recent success in keeping Bank of Ireland in private hands is also a major psychological boost.

Fundamentally, Ireland is also displaying an admirable social resilience. It takes little knowledge of history to place this in a perspective that has already seen the economy weather four dreadful economic crises in less than a century. It matters too that emigration has yet again helped to contain unemployment to some degree -- even though, at 14pc, it is worryingly high.

As a result of all this, growth is starting to re-emerge, even though domestic demand is still contracting. As expansion accelerates, it will generate jobs only slowly. But with the speed and slope of correction in competitiveness that is under way, the feed-through to domestic demand and job creation will come. And over the next few years a socially more sustainable balance to the recovery will also end up swelling the tax base more strongly than the present pattern of export-led growth. For the pressured taxpayer, there is a glimmer at the end of the tunnel.

We are highly conscious of the contagion risks posed to Ireland by further bond market or banking shocks elsewhere in the eurozone, or by any setback in world trade. And no one can ignore the political challenge of keeping Ireland ahead of the Troika's targets. It also has to be stressed that we are assuming firm persistence in the course of fiscal consolidation. This said, we do believe that Ireland's macroeconomic fundamentals provide the most important defence there can be against all forms of shock.

Perhaps most important of all, an Irish success story of the kind we think is under way will come to be seen as a precious and crucial trump card for the eurozone debt strategy. It gives the lie to fears about a generalised transfer union. And it illustrates that adjustment in the eurozone is feasible, just as currency board countries in the Baltics have wrongfooted the diehard pessimists.

In short, when we look at Ireland against sovereign spreads in the eurozone, we see a mismatch. Either markets are persuaded that economic policies can never defeat contagion, or understandably -- given pervasive crisis fatigue -- they have dropped off to sleep at the wheel.

The writers are a professor of economics and a fellow of Wolfson College at Oxford University

- David Vines and Max Watson

Irish Independent

Taking the pain early has shown Ireland to be quicker and more courageous than most in adapting to economic adversity, writes Economics Editor Brendan Keenan

AT last, someone has noticed, even if they are foreigners. Or perhaps it is because they are foreigners.

One does not have to share all the optimism about the future of the Irish economy contained in the 'Financial Times' article by David Vines and Max Watson. Many Irish economists would quibble with the modest ceiling they put on Irish debt or their view that the corner has been fully turned in the banking crisis.

Spoiler Alert, click show to read: 

But Professor Vines and Mr Watson -- the latter helped draw up reports on the Irish banks and sits on the new Central Bank commission -- are right to say that Ireland is different from the other two rescued economies, Greece and Portugal: different, indeed, from the rest of the eurozone.

The difference is the speed with which Ireland is reducing its costs. New figures from the European statistics service yesterday show once again that Ireland has not only the lowest inflation in the 17-nation eurozone but that it is in a category all of its own.

This has been the pattern since the crash. It is calculated that the difference in inflation means that half the extra increase in Irish prices since the euro was launched in 1999 has now been eliminated.

This is exactly what markets fear Greece and Portugal -- and perhaps Spain and Italy -- cannot do. They are held back, not just by the need for austerity to reduce debt, but by not being able to compete with Germany and its satellite economies.

Ireland's remarkable deflation may well eventually restore investor confidence, but it is a short-term headache for the Government. Debt is measured against the money ('nominal') value of the economy and low inflation holds that back, making it harder to achieve deficit targets.

As the table shows, although the Irish economy grew only slightly less than that of Britain, rampant inflation gave the UK nominal growth of almost 5pc, while Ireland's was just 1pc.

The second headache for the Government is that to concentrate on competitiveness means minimising extra costs for business or consumers.

Better to cut their incomes instead, whether through lower pay or higher taxes.

Good economics maybe, but lousy politics.

Irish Independent

Please god let this be true, but I have to say we have been here before and it did not end good.





Global stocks plummet on new recession fears

Global stock markets have fallen sharply, with the Dow Jones dropping over 500 points shortly after opening amid new doubts about the world economic outlook.

Spoiler Alert, click show to read: 

Global shares have fallen sharply, with the Dow Jones dropping over 500 points shortly after opening and sharp falls also seen on European stock markets.

Dublin's ISEQ index was down 111.58 points (4.4%) to 2454.64 at the close this evening.

London's FTSE closed down 4.49%. Germany's Dax was down 5.5% to 5,628 points, while the Paris CAC dropped 5.48%.

This afternoon Morgan Stanley said its new forecasts showed the United States and the eurozone 'hovering dangerously close to recession.'

The bank cut its 2011 global growth outlook to 3.9% from 4.2%, and the 2012 forecast to 3.8% from 4.5%.

Once again, aversion to risk swept the financial markets, with corporate bonds, industrial commodities and higher-yielding currencies sliding.

Assets viewed as safe-havens - such as gold, government bonds and the dollar - have all gained. Gold rose to its second record high in a week - $1,826 - this afternoon.

The sell-off 'is rooted in the European banking system,' said Jack de Gan, chief investment officer at Harbor Advisory Corp.

'It reflects continued concern that sovereign debt issues indicate we're going to have to bail out all those banks again. And if there's stress in major European banks, it will affect US banks too.

Banking stocks in Paris were particularly hard hit, with BNP Paribas off 8.24%, Credit Agricole down 9.0% and Societe Generale lost more than 12%.

Meanwhile, this week's fresh plans to tackle the eurozone debt crisis have clearly failed to win over investors, who brushed off Tuesday's summit meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel.

Traders also dismissed the pair's proposal for a Europe-wide tax on financial transactions as 'old hat,' likely to be ineffective at best and at worst driving business out of Europe into other centres.

Asian stock markets slid earlier today, with Tokyo down 1.25% to record its lowest finish since March 15 - four days after it was hit by an earthquake and tsunami that spiralled into a nuclear disaster.

Yea I knew it was too good to be true

[Furunculus]

good news for ireland.

-----------------------

now, who was it that was mocking me for saying that the european banking sector was about to take a hammering...........? step forward, there's a brave boy. :)

[Adrian II]

now, who was it that was mocking me for saying that the european banking sector was about to take a hammering...........? step forward, there's a brave boy. :)

Having trouble with the facts again, Furunculus? You predicted that banks failing the stresstest would be clobbered, which they weren't. That's all there was to it.

While you're at it, you may want to answer my question re Germany and fiscal optimum?

AII

[Furunculus]

Having trouble with the facts again, Furunculus? You predicted that banks failing the stresstest would be clobbered, which they weren't. That's all there was to it.

While you're at it, you may want to answer my question re Germany and fiscal optimum?

AII

au-contraire; i considered that the stress-tests would likely, once again, be considered worthless, and that once this was confirmed that euro banks would take a clobbering. the tests being intended to 'demonstrate' the fundamental health of the european banking system in the face of new shocks.

run the graph from the 18th July to the 18th of August, watch the drop:
http://www.stoxx.com/indices/index_i...ml?symbol=SXXP

http://www.marketwatch.com/story/hol...ope-2011-08-18

“Banking stocks have been decimated across Europe, with indiscriminate selling even in banks that maintain their exposure to the crisis is slim,” said Will Hedden, sales trader at IG Markets. “No sector is surviving this tidal wave of selling, and the fact that financials are first in the firing line will only lend support to the anti-short-selling-ban camp.”

what was you question about the german fiscal optimum?

[Adrian II]

run the graph from the 18th July to the 18th of August, watch the drop:
http://www.stoxx.com/indices/index_i...ml?symbol=SXXP

My dear boy, the stress test findings were published on July 15th and the drop only started August 2nd. The latter has obviously had nothing whatsoever to do with the former. Intervening trends and occurrences such as the US debt limit circus or the ECB interventions in Spain and Portugal are more likely candidates, wouldn't you say?

what was you question about the german fiscal optimum?

You said 37% aggregate tax -> optimal growth

I say German aggregate tax = more like 50% -> superior growth

AII

[gaelic cowboy]

My dear boy, the stress test findings were published on July 15th and the drop only started August 2nd. The latter has obviously had nothing whatsoever to do with the former. Intervening trends and occurrences such as the US debt limit circus or the ECB interventions in Spain and Portugal are more likely candidates, wouldn't you say?



You said 37% aggregate tax -> optimal growth

I say German aggregate tax = more like 50% -> superior growth

AII

Tax has nothing to do with German growth though does it?? Germany takes a big interest in ensuring the export environment is suited to it's companies.

They specifically disincentivise certain parts of the economy to ensure manufacturing over services and consumption.

[Furunculus]

My dear boy, the stress test findings were published on July 15th and the drop only started August 2nd. The latter has obviously had nothing whatsoever to do with the former. Intervening trends and occurrences such as the US debt limit circus or the ECB interventions in Spain and Portugal are more likely candidates, wouldn't you say?

they would be the shocks i was talking about, and yes they are part of the decline.

You said 37% aggregate tax -> optimal growth

I say German aggregate tax = more like 50% -> superior growth

AII

i have seen nothing to indicate that that would be true, given the three papers i linked.

[Adrian II]

they would be the shocks i was talking about, and yes they are part of the decline.

The stress clearly test wasn't a shock to anyone, anywhere. Nor was it a relief. It was just a useless exercise, can we at least agree on that?

As for the tax issue, it's too complicated for poor old AII to go into all of that right now. There may well be an optimum tax level per country, but it would vary according to the specifics of each economy. Putting it at 37% is fetishism.

Generally speaking tax computations fail to take into account the medium and long term effects of specific taxes. A prime example would be a punitive tax on fuel which hampers growth in the short term but forces industry to innovate and find new energy sources and technologies, thus stimulating growth in the longer term.

AII

[Kagemusha]

It would seem half of the Euro countries have joined Finland in demanding cash guarantees from Greece, while Merkel and Sarkozy dream of "eurobonds". I cant understand what dream world the leaders of largest euro countries are living in? If the economies of Southern and Northern Europe have so different level of strength, how can they think that the North should just give everything up they have achieved with hard work, so the South can live as they please.

Cant we just have a monetary Union without some delusional dreams of Federal State, when it is clear that majority of people in most European countries dont want that?

[gaelic cowboy]

It would seem half of the Euro countries have joined Finland in demanding cash guarantees from Greece, while Merkel and Sarkozy dream of "eurobonds". I cant understand what dream world the leaders of largest euro countries are living in? If the economies of Southern and Northern Europe have so different level of strength, how can they think that the North should just give everything up they have achieved with hard work, so the South can live as they please.

Cant we just have a monetary Union without some delusional dreams of Federal State, when it is clear that majority of people in most European countries dont want that?

Not really man the problem is that countries without there own currency are being attacked/shrewdly bet against and cannot use the usual means of preventing this problem Inflation/Devaluation.

In effect the markets have quite rightly found that internal devaluation ie reduction of living standards or implementation of austerity does not work in a currency union hence the bailouts.

The bondmarkets and interbank lending is forcing the ECB to act more like a normal central bank and less like it has up to now, hence the buying of bonds and the extension of liquidity to weak banks.

Unfortunately the more it acts like a proper central bank the less people in the North like it.

[Fragony]

It would seem half of the Euro countries have joined Finland in demanding cash guarantees from Greece, while Merkel and Sarkozy dream of "eurobonds". I cant understand what dream world the leaders of largest euro countries are living in? If the economies of Southern and Northern Europe have so different level of strength, how can they think that the North should just give everything up they have achieved with hard work, so the South can live as they please.

Cant we just have a monetary Union without some delusional dreams of Federal State, when it is clear that majority of people in most European countries dont want that?

A north and south would be lovely, and we bail out the Irish because the Irish are sympathetic

[gaelic cowboy]

If you ask me there are several possible solutions to the problem of not having a nice even Euro.

1 Divide the North and South.
2 Unshackle the ECB
3 Integrate fully (not the new Sarkozy/Merkel fuzzy announcement I mean a federal state)
4 Eurobonds

To be honest option one is the best really in my view but it would prob take maybe 5 to 10 years in order to not cause a major flight of capital out of the Eurozone.

What there doing is trying to convince people in the South to accept lower everything along with higher inflation which balances the equation as a whole (Great for Germans the pressure is off them, not so great for Southern workers or there unemployed hence the rioting)

The only reason Ireland is bucking the trend is because we have reduced our costs of doing business, we have low inflation and it's getting lower plus were exporting a lot outside the Eurozone
We still however owe a lot due to the bailout which limits our growth potential due to austerity, Spain Italy Greece and Portugal have none of the things to be hopeful about that I stated are present in the Irish economy and all of the same bad ones.

Also it helps when your population is highly mobile and also crucially young enough still to relocate both internally and abroad.

[Fragony]

You are the expert Gaelic Cowboy, why not introduce a second currency, no garlic allowed

[gaelic cowboy]

You are the expert Gaelic Cowboy, why not introduce a second currency, no garlic allowed

To be honest I think they will continue to prevaricate until the Euro explodes, if they ignore the problems for long enough there is no reason to think Germany itself cannot be affected.

[Louis VI the Fat]

* uses sign language with the recent arrival from the Guangzhou hinterland, points at number three on the menu *




Louis - and make it non-spicy and with ketchup, please.

[gaelic cowboy]

* uses sign language with the recent arrival from the Guangzhou hinterland, points at number three on the menu *




Louis - and make it non-spicy and with ketchup, please.

Sorry were out stock

[Louis VI the Fat]

Sorry were out stock

When it comes to the EU, I don't take 'no' for an answer from any Irish.



Louis - brutalising naysayers into submission since 2007

[gaelic cowboy]

When it comes to the EU, I don't take 'no' for an answer from any Irish.



Louis - brutalising naysayers into submission since 2007

Third times a charm Louis
Nice= NO
Lisbon = No
MerKozy Plan = ?

Spoiler Alert, click show to read: 

hell no the people are mad and there gonna express that annoyance at the ballot, plus they will be worried at losing even more sovereignty.

If they water the plan down then it wont be doable, the debt limit will be dropped and the new idea is merely as toothless as the old stability and growth pact.

[Kagemusha]

Why are they so bloody greedy? Europe is huge. If they want an successful integration.Why not start with smaller regional Unions? Such might actually get even some democratic support. The leaders are constantly trying to bite more they can chew and Louis fear of Chinese i doubt is enough to drive Europeans into integration frenzy.

[Adrian II]

Yes but we are the only ones getting direct cash from Greece.If the Greek bonds dive further.You will not be getting anything.Just read the article.

The Dutch PM and Finance Minister deny that there is such a Finnish-Greek deal. Well, is it official or not?

According to The Hague any such deal would (1) apply to all EU eurozone members lending money to Greece and (2) require approval from the other eurozone members.

So, what's up Helsinki-side?

AII

[Tellos Athenaios]

I take the words of the Dutch PM and Finance clowns with a grain of salt. Especially when they contradict a deal they had nothing to do with, when they actually contradict the people who supposedly did sign off on it.

[Adrian II]

I take the words of the Dutch PM and Finance clowns with a grain of salt. Especially when they contradict a deal they had nothing to do with, when they actually contradict the people who supposedly did sign off on it.

That's why I'm asking. Those two ****brains don't have a clue.

AII

[Brenus]

When you divide between North and South, where do you put France?

[Tellos Athenaios]

When you divide between North and South, where do you put France?

In many ways, France is quite on the other side of any kind of divide. From the way it handles worker protests to the bigger than life qualities in the person of Mr. Sarkozy to the language and cultural divide to a certain flair and attention to detail whilst neglecting the overall state of maintenance (i.e. beautiful, well kept flower beds on roundabouts or besides pavements, in towns full of dilapidated buildings and patchy road works).

In other ways, Mr. Sarkozy and the French élite will probably convince themselves that even if they do not have Germany's economic weight they are in some sort of leadership position which compels him -whatever it is about- to be “on the forefront” if it concerns “Europe”. So wherever we might draw any divide, France will end up included anyway.

[Philippus Flavius Homovallumus]

If you ask me there are several possible solutions to the problem of not having a nice even Euro.

1 Divide the North and South.
2 Unshackle the ECB
3 Integrate fully (not the new Sarkozy/Merkel fuzzy announcement I mean a federal state)
4 Eurobonds

To be honest option one is the best really in my view but it would prob take maybe 5 to 10 years in order to not cause a major flight of capital out of the Eurozone.

What there doing is trying to convince people in the South to accept lower everything along with higher inflation which balances the equation as a whole (Great for Germans the pressure is off them, not so great for Southern workers or there unemployed hence the rioting)

The only reason Ireland is bucking the trend is because we have reduced our costs of doing business, we have low inflation and it's getting lower plus were exporting a lot outside the Eurozone
We still however owe a lot due to the bailout which limits our growth potential due to austerity, Spain Italy Greece and Portugal have none of the things to be hopeful about that I stated are present in the Irish economy and all of the same bad ones.

Also it helps when your population is highly mobile and also crucially young enough still to relocate both internally and abroad.

So gaelic, do you think that if Ireland had not accepted a bailout, and the attendant millstone, it would now need one?

I wonder myself.

When you divide between North and South, where do you put France?

cut the country in half, same with Italy, people keep telling us we need more federalism in the UK, what's good for the Briton is good for the European.

[gaelic cowboy]

So gaelic, do you think that if Ireland had not accepted a bailout, and the attendant millstone, it would now need one?

I wonder myself.

We cant know for sure, but it could have been done.

The garauntee was only started because there was a potential run on Anglo threatening the whole system, it was supposed to end in the back end of 2010.

The back end of 2010 was when the ECB started there funny business with our banks, once they got us bailedin they extended the bailout and refused haircuts.

The way I see it after the garauntee would have lapsed, the Irish banks would have failed burning banks all over Europe. Bank failure in Ireland has consequences however we cannot foresee, my guess is that even France and Germany could have been badly hurt in a Lehmans style credit crunch

SO it depends on what your more afraid of either bailing us out or scalping bondholders.

[Kagemusha]

The Dutch PM and Finance Minister deny that there is such a Finnish-Greek deal. Well, is it official or not?

According to The Hague any such deal would (1) apply to all EU eurozone members lending money to Greece and (2) require approval from the other eurozone members.

So, what's up Helsinki-side?

AII

It is telling that Euro media is not even putting it out,our financial minister Jutta Urpilainen put it out on tuesday like i di..The question is why is this not in bbc or deutchewelle, nor le monde