Interesting Contributions: Daniel Gros

EU or Euro-zone seat at the IMF

How to avoid trade war: A reciprocity requirement

How to deal with sovereign default in Europe: Towards a Euro(pean) Monetary Fund

News and bond Markets: predicting the effects of ECB comments about IMF on Greece

So Bloomberg has an article where a member of the executive board of the ECB says the IMF may extend the duration of Greece's debt relief package. Now, assuming that bond markets use similar signals as the one forex and libor markets use (ie: the news broadcasted around them), this piece of information should have some effect on the bond markets tommorrow. What I'm going to try to do is to try to guess today and check what happened tomorrow at the end of the day. My idea is that bonds will be trading at fairly low prices at the beginning of the day and will remain so unless some new piece of information arises. The logic is that all that this piece of information says is that Greece is in worst shape than anyone has dared to admit. It doesn't say that the IMF will do it. It says that it is considering it and that it is feasible. Funnily enough this shock to the coupon (or nominal) yield will push them so high that it might in the end fulfil the prophecy that Greece does indeed need more time to deal with this situation, simply by making the short run more unbearable for Greek bonds. As the miserable state of the Greek economy is made clearer to investors, prices will decrease and the nominal (coupon) yields of its bonds will rise until Greece's medium term access to credit is made clear, at which point if there ate no other news of relevance, things should calm down. Let's see if that's what happens or if I'm just full of it...

The EMF - EFSF - has a website

A little note on the European Monetary Fund:

It is officially not called that. It's called the European Financial Safety Facility, or EFSF for short (created as a societé anonyme under Luxembourg's law), and there's a website that one can access here, with among many other things, a very interesting F.A.Q. PDF file.

Is saudade why all the Frenchmen fear English?

So I came across this post from the very liked (by me) Jean Quatremer of "Libération".

In that article he elaborates on the fact that the English language is all too pervasive in the EU institutions and how that's bad for everyone, particularly his country's elite. His argument, although I don't agree with it, should not be dismissed altogether. As the national of a small country with a beautiful and flexible language and a phenomenally imponent body of European, African and South American literature, I understand the "saudade" we may feel towards our own languages but to use it to argue what he argues seems insulting, sad and oh so cliché for a Frenchman to do.

His hypothesis runs something like this: "Language is an important channel of communication. Some ideas are inherently better articulated in one language than in another, if for no other reason that they might have developed in the context of the evolution of that (language's) society. So to favour one language to another (or many others), deprives us of the contributions (intellectual and, in this specific case, political) originating elsewhere (where another language is spoken)."

This is tantamount to arguing that some ideas are inherently French, or for that sake, English, Portuguese, Hungarian, Swedish, or whatever. And not in the sense that they belong to that culture, but that they can only be expressed in that language. So I don't agree.

Trade, Exchange rates and Democracy

So I've been thinking: Should trade policy be related with democracy? Are countries who are bigger, poorer and undemocratic more likely to be protectionist? If so should we create added trade barriers to these countries, is it irrelevant or does this hypothesis not imply the need for trade barriers?

EU-China: We push them, they push back...

Here's how the much touted EU-China summit ended. So not so well... Now what's next? Do we sanction them and risk alienating them? Or do we just wait it out and alienate our electorates further. It'll be interesting to see how things process from here, but clearly there's no clear cut answer to this problem. China is too big a risk...

Wofgang Munchau on the Chinese Renmimbi Manipulation

If you are interested in what happens in the world, please read this article by the FT's Wolfgang Munchau.It summarises the economic logics underlying the discussions about Chinese monetary intervention. More importantly it argues for a forceful approach to Chinese monetary manipulation. I'm a big fan of his blog, and even if I don't always agree with him, he is always insightful, clear and fair. He mentions an article from VoxEU contributor and Centre for European Policy Studies' Director Daniel Gros, which very intelligently argues for the use of reciprocity in arguing for capital controls, which would be legal, apparently, against the much touted trade wars.I agree with these means, as it seems nothing better exists. However, I believe his analysis may be slightly myopic.

International Cooperation: China-EU Relations

So there has been a lot of interaction between EU and China, as of recently. I'll start with the following article from the Chinese Embassador to the EU, where he praises the Lisbon treaty and it's ability to increase European integration, thus endowing the EU with a new authority and consequent ability in international relations, fundamental to the EU-China foreign strategic relationship (whatever it may be...).

Then we follow with the renewed calls for Beijing to allow the renmimbi to float, which is really to say that the EU and the USA want it to appreciate.

The Chinese on the other hand want to leave it be for fear it'll create chaos, which I'm assuming they fear would be large enough to topple the single party regime.

At the same time the Chinese seem to have requests of their own, involving European countries giving up some of their IMF seats.

What does all this chatter mean?

SGP3: The European Commission initial proposals

The news report from EUobserver The official description provided by the European Commission: In General terms, Strengthening the SGP, The preventive and Corrective measures and Chronology and overview of the new framework of surveillance and enforcement (where they fail to mention the chaos of 2002-2005 and the SGP2 reform of 2005). Finally, here and here are the highlights and the arguments in favour from the European Commission at VoxEU.

Chinese Economics and the USA

The FT had an interesting article about monetary policy in china and it's effects on the us economy.