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20110625 Follow Me 46 wwqqer
wwqqer
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2011-06-25
The euro zone’s leaders are seeing their political choices narrow
Jun 23rd 2011 | from the Economist

EVANGELOS VENIZELOS is a big man, built more like a rugby forward than a bookish finance minister. As the politician now charged with fixing Greece’s broken finances, he will need to muster all his strength. On his first outing to meet European colleagues in Luxembourg this week he found himself like a prop pinned under a ruck, with studs tearing into his flesh.

The inexperienced Mr. Venizelos left himself dangerously exposed. He tried to reopen the austerity and labor-reform package, particularly the pace of privatization, which is a condition for receiving more bail-out money and saving Greece from default. He suggested the parliament might not meet a deadline to approve the measures by the end of the month. Worst of all, Mr. Venizelos insinuated that other Europeans had no choice but to save his country because a default would be more painful for the euro zone than for Greece. Boots and fists were soon flying.

Still, he had a point. For months now, the European Central Bank and European Commission (and, more quietly, parts of the IMF and the Americans) have been urging ministers not to entertain even a modest restructuring of Greek debt, let alone a full-blown default, for fear of disastrous contagion. With signs of trouble spreading to other countries, including Spainand Italy,the words “Lehman Brothers” are uttered ever more often. The dilemma is summed up by Keynes’s adage: “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.”

By autumn, euro-zone ministers expect to have finalized a second bail-out for Greece that will protect it until 2014. At that point, claim the EU’s and IMF’s economists, Greece will have returned to growth and reached a primary budget surplus (ie, it will raise more revenue than it spends, before interest). Officials say repaying the vast debt will be “difficult but not impossible”. They have to affect optimism: as they try to save Greece from default today, they can hardly admit that it is sure to default tomorrow.

But even if ultimate salvation is possible, Greece could fall into plenty of immediate traps. One is the mood at home, with almost daily mass protests outside parliament, interspersed with riots. What if Mr. Papandreou cannot get a majority for unpopular reforms? Another is the sternness of the IMF, which says it cannot release next month’s tranche of money before it knows that the euro zone will fully fund Greece next year. A third is the mood of creditor countries such as Germany, which have been insisting on a “substantial” contribution by private bondholders. After much argument, this is now supposed to be done “voluntarily” by rolling over the debt at maturity. But nobody really knows how much room this can create.

All this is knotted up. Without sufficient private-sector help, some countries say they will not give more money; without certainty about who pays for what, the IMF says it cannot release the funds; without the IMF, the euro zone cannot pay either; and without more tranches of help, Greece will default. Even if Greece can be salvaged, attention is turning to the long-term survival of the euro. To Eurosceptics, notably British ones, it should be given up as a bad job. The tragedy of Greece is the inevitable outcome of EU leaders’ hubris in imposing a single currency and a single interest rate on incompatible economies.

Disunited states of Europe

For Euro-federalists, such as Guy Verhofstadt, a former Belgian prime minister, the answer is to move towards a United States of Europe. Even an American such as John Lipsky, the acting head of the IMF, called on Europeans to rediscover the dream of integration. Jean-Claude Trichet, president of the ECB, says that one day there should be a European finance ministry to co-ordinate fiscal policies. He argues that the euro’s performance is comparable to that of the dollar and that growth per head, price stability and even the extent of economic divergence are broadly similar in America and the euro zone. Indeed, the euro zone’s aggregate deficit and debt levels are healthier than America’s.

But the comparison is flawed. The euro zone is not a federal state. Its key decisions are national, and hence agonizingly slow. Fiscal transfers within the EU are far smaller than in America, so cannot help countries absorb sudden shocks. For Germany, especially, the idea of a “transfer union” is anathema. It is willing to transfer rules on fiscal discipline and the labor reforms that helped it regain competitiveness. But the idea of closer fiscal integration will not go away. The European Commission has promised to study how countries might issue common Eurobonds.

Whether it is through tougher rules that shift economic powers to Brussels, or perhaps one day a bigger fiscal union, the crisis is forcing the euro zone into more integration. As one Eurocrat puts it, “We are speleologists trapped in a tunnel. We cannot go backwards; we can only go forward.” But the risk is that, in trying to avert the break-up of the euro, leaders will create a bigger political backlash, against both themselves and the EU. Mr. Venizelos knows it. His rescuers know it. That is why they have been at each others’ throats.

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Comment:
I chose this article from the Economist because it vividly describes the current political issue in Greece with a plenty of information in a typical "the Economist-style" way.

Evangelos Venizelos is the newly appointed finance minister of Greece. The Greek government is nowadays pressured by both its people on one side who are to suffer from the government's austerity plan, which means low wage and high unemployment, and ECB and IMF on the other side who urge Greece to implement the austerity plan strictly in order to gain credibility for further aid and thus avoid any credit event like default/restructure on debt since any such credit event can trigger financial contagion across EU.

However, if a default is inevitable, to postpone it at this time requires much larger aids from private market as Martin Feldstein pointed out ("Postponing Greece’s inevitable default", http://blogs.ft.com/the-a-list/2 ... inevitable-default/). I guess China is very likely the white knight to buy the debt. (http://finance.huanqiu.com/roll/2011-06/1779576.html)

On today's Financial Times (June 24, 2011), China's premier Wen writes an Op-ed article (http://www.ft.com/intl/cms/s/0/e ... .html#axzz1Q7OFtz8N). Unfortunately, the article is full of platitudes, so I chose not to post it here. NO NEW information that I can obtain. Wen claims in the article that China can "rein in inflation and sustain its rapid development", and plans to shift its development model in its 12th five-year plan. Given the recent rumors of the increasing risks on China's huge amount of local government finance vehicles (LGFV), conflicts in South China Sea with neighboring countries, and labor chaos in Southern China and Inner Mongolia, I am curious about the timing of the publication, and suspect the purpose of the article is just to calm down foreign investors that China can manage its economic soft landing.


p.s.1大家的阅读笔记可以开始整理了，Fruits的评选7月1日就将开始
关于Fruits https://bbs.pinggu.org/viewthread.php?tid=1110827&page=1&extra=
2 请明天有时间发帖的坛友们在跟帖后表明OK，以便我们及时选取出第二天的The best!多谢合作哈
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wwqqer
2011-6-25 01:11:40
The assumption is still that the euro zone will somehow muddle through, atleast for a while. George Papandreou, the Greek prime minister, won a vote ofconfidence this week, raising hopes that his reform program, perhaps with sometinkering, will be approved by the end of the month. Euro-zone financeministers are due to meet on July 3rd to endorse the next tranche of loans,worth
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EmmaUK
2011-6-25 01:15:45
35,35

I was watching TV last night and British people are having a big discussion on TV about "Is the current situation in Euro-Zone affecting them or not ?" If so, how and to what extend?

Well, no doubt that  Euro-Zone is  in such a mess now. I personally do not think the reform programe in Greece will work.  However, it might buy the entire European some time to deal with the current situation.  Eventually, they have to think the European as a whole, otherwise everybody will sink. No one will survive.
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EmmaUK
2011-6-25 01:16:59
楼主，下次不带自己坐沙发的？！？！呵呵！
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bengdi1986
2011-6-25 05:54:37
呵呵，做个板凳都行了，我都站到后边看你们了！！太不公平了
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bengdi1986
2011-6-25 07:53:18
恭喜哈，已经修改的很好的了，这篇文章看过，嘿嘿，辛苦了，朋友！
希望大家能够积极给楼主评分哈
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