BRUSSELS: The first de facto default of a country classified as “developed” has now taken place, with private international creditors “voluntarily” accepting a “haircut” of more than 50 percent on their claims on the Greek government. As a result, (...)
BRUSSELS: Europe seems to be obsessed with austerity. Country after country is being forced by either the financial markets or the European Union to start cutting its public-sector deficit. And, as if this were not enough, 25 of the 27 EU member (...)
BRUSSELS: Great empires rarely succumb to outside attacks. But they often crumble under the weight of internal dissent. This vulnerability seems to apply to the eurozone as well.
Key macroeconomic indicators do not suggest any problem for the (...)
BRUSSELS: Is the eurozone stepping back from the brink? This might just be possible, because the emerging outlines of a new framework to resolve the ongoing sovereign-debt crisis contain a key component that was missing so far. Indeed, that (...)
BRUSSELS: Interest rates are now close to zero throughout the developed world (the United States, Europe, and Japan). But the global economy is slowing down, and financial markets went into a tailspin during the summer. This suggests that the (...)
BRUSSELS: The first act of the eurozone debt drama was about whether any European Union member country could ever become insolvent. It ended when the highest EU authority, the European Council, officially recognized in late July that Greece does (...)
BRUSSELS: Once upon a time, there was a country plagued by large deficits, high inflation, and decades of economic stagnation. When economic problems once again became particularly acute, the country's leadership embraced a radical approach to (...)
BRUSSELS: The current crisis in the eurozone is known around the world as the “euro sovereign-debt crisis.” But the crisis is really about foreign debt, not sovereign debt.
The importance of foreign debt is well illustrated by the case of (...)
BRUSSELS: Back in 2007-2008, when the financial crisis was still called the “subprime” crisis, Europeans felt superior to the United States. European bankers surely knew better than to hand out so-called “NINJA” (no income, no job, no assets) loans. (...)
BRUSSELS: Is the euro crisis any closer to a resolution? Europe's leaders have promised to devise by the end of this month a comprehensive package not only to end the crisis, but also to preserve the euro's stability. Unfortunately, they are (...)
BRUSSELS: The first decade of this century started with the so-called dot-com bubble. When it burst, central banks moved aggressively to ease monetary policy in order to prevent a prolonged period of Japanese-style slow growth. But the prolonged (...)
BRUSSELS: The eurozone is being thrown into turmoil by a collective rush to the exits by investors. Yields on government debt of peripheral eurozone countries are skyrocketing, because investors do not really know what the risks are.
Officials (...)
BRUSSELS: For decades, the world has complained that the dollar's role as global reserve currency has given the United States, in a term usually attributed to Charles de Gaulle but actually coined by his finance minister, Valery Giscard d'Estaing, (...)
BRUSSELS: Europe's leaders never tire of reminding their constituencies, almost like a mantra, that the major emerging-market countries are overturning the existing global economic order. But when it comes to recognizing that reality in the world's (...)
BRUSSELS: Two years after the world economy suffered a nervous breakdown in the wake of the collapse of Lehman Brothers, global financial markets remain unsettled, and the recovery that started so vigorously in 2009 seems to be stalling.
The (...)
BRUSSELS: Sometimes the most important news is what is not happening. This summer has given us one such example: the climate-change bill, for which President Barack Obama had pushed so hard, will not even be presented to the United States Senate, (...)
BRUSSELS: Europe continues to constitute the epicenter of Act II of the global financial crisis, which has now mutated into a sovereign-debt crisis within the eurozone. How could this happen when, at least on paper, all problems had seemingly been (...)
BRUSSELS: The President of the European Central Bank is said to show at each meeting of the European Council a graph depicting the evolution of relative wage costs across the eurozone's 16 member countries. This chart shows increasing divergences (...)
BRUSSELS: The euro area confronts a fundamental crisis that attacks on financial speculators will do nothing to resolve. The European Council of Ministers had to promise hundreds of billions of euros to its financially imperiled member countries, (...)
BRUSSELS: As Greece activates its €45 billion rescue package with the International Monetary Fund and the European Union, it is becoming clear that a new, far more comprehensive approach is needed. Two problems need to be addressed: the credibility (...)