What To Do With Europe

• The Wall Street Journal – Olli Rehn: How We’ll Build European Monetary Union 2.0
Europe is committed to building a genuine economic union to strengthen our existing monetary union
The euro zone is at a decisive juncture—not only in its three-year-old debt crisis but in its 13-year-old history. And the two are inextricably linked: The short-term symptoms of this crisis have their roots in long-term ailments. Europe is undergoing a correction of the macroeconomic imbalances that built up before the financial shock of 2008. Over the last decade, Europe’s integrated financial market channeled savings from countries with sluggish domestic demand to countries where demand was thriving, credit was booming, and wages and prices were increasing. Over the last two years, Europe has made remarkable progress in addressing these imbalances. Consider the three euro-zone countries under full economic adjustment programs: Ireland has been able to re-access the markets earlier than envisaged. Portugal’s stronger-than-expected export growth is helping to offset weaker domestic demand. Even Greece has achieved more than is often realized. Its current government is committed to reforms and enjoys broad parliamentary backing. Negotiations are ongoing over the future of the Greek economic adjustment program.

• The Telegraph (UK) – Debt crisis: ECB buying Spanish and Italian debt ‘makes no sense’ says Belgian bank governor
The European Central Bank should not buy Spanish and Italian debt because it “makes no sense” and will take away the pressure on politicians to act, Belgium’s central bank governor has said.
Luc Coene told Belgian newspapers De Tijd and L’Echo that buying the bonds of these countries would only serve to weaken the ECB and do nothing to resolve underlying issues of competitiveness. “It makes no sense for the ECB to start financing those countries,” said Mr Coene, “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet,” he said. “That would in turn weaken the ECB and do nothing to resolve the underlying problems.” Mr Coene also said that the central bank’s efforts to calm markets last summer with around €135bn of additional debt purchases on the secondary market via its Securities Markets programme took away the pressure on politicians to act. “We haven’t forgotten what happened in August of last year: We bought Italian bonds and right after that the Italian government reneged on its pledges,” he said.

• The Telegraph (UK ) – Silvio Berlusconi says euro exit would be a ‘disaster’ for Italy
Ex-Italian prime minister Silvio Berlusconi has said that a euro exit could lead to a disintegration of the single currency
Silvio Berlusconi, the former Italian prime minister, has said that an exit from the euro by Italy “would be a disaster”. In an interview with French newspaper Liberation, Mr Berlusconi said that his political allies are united in support for the euro and have backed Mario Monti, the current prime minister, to push for more stimulus measures since austerity and budgetary discipline aren’t enough. Should any country leave the single currency, it is possible that the euro would “disintegrate”, Mr Berlusconi said. He advocated greater political unity with the direct election of the European Union president in addition to fiscal and economic harmonisation. Mr Berlusconi, who resigned last November to cede the premiership to technocrat Mario Monti, also said he had not yet decided whether to lead his party in next April’s general election. “It’s a fact that the whole party, starting with the members of parliament, are asking me to come back to benefit from my popularity at the general election,” said the 75-year-old billionaire, who has served three times as prime minister.




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Max Konzelman

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