Markets, Information, Communication and the Euro-zone Fiscal crisis

Above you can see a segment from an extremely good article by Carmassi and Micossi which can be found at VoxEU. It is about the chronology of the fiscal crisis in Greece and how miscommunication between the European Commission and Germany may have made a mess. To be honest it should be said that they do survey a very limited and rather biased sample of newspapers (Thompson-Reuters and the FT), but it is a fairly acceptable simplification from constructing a weight matrix for a larger number of newspapers that would provide a rather limited improvement of the explanation. A "must read" nonetheless!

Jean Quatremer interviews the Greek finance minister

The full article as it was published online in his blog at the website of Libération, can be found here. I've excluded the introduction. I am impressed by the apparent serenity of the Greek official. Please check ou the original website for more content. There's a particularly intriguing article about British disinformation and the Greek isles of the Aegen sea... You do however need to read French to follow the article. Alternatively run it through google translate. Here it is:

VoxEU and Policies for a Europe in a Fiscal Crisis

VoxEU, that "not-for-profit" beakon of economic thinking, has released a very good eBook on the ongoing fiscal crisis, edited by Richard Baldwin and Daniel Gros. I take the liberty of pasting the table of contents from the link above. If you have any interest in economic policy and the future of the EU, you can't miss this.

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The eBook’s Table of Contents

Completing the Eurozone rescue: What more needs to be done? Edited by Richard Baldwin and Daniel Gros

Introduction: The euro in crisis – What to do? Richard Baldwin and Daniel Gros

Drawing a line under Europe’s crisis Barry Eichengreen

The Eurozone needs a political union, or at least elements of one Paul De Grauwe

The Eurozone's levitation Charles Wyplosz

Eurozone governance: What went wrong and how to repair it Jean Pisani-Ferry

The European bicycle must accelerate Angel Ubide

What more do European governments need to do to save the Eurozone in the medium run? Thomas Mayer

The narrative outside of Europe about Europe’s fiscal crisis is wrong Avinash D. Persaud

Rethinking national fiscal policies in Europe Philip R Lane

A credible Stability and Growth Pact: Raising the bar for budgetary transparency Michael C. Burda and Stefan Gerlach

Fiscal policy at a crossroads: The need for constrained discretion Antonio Fatás and Ilian Mihov

Fiscal consolidation as a policy strategy to exit the global crisis Giancarlo Corsetti

German spending is not the cure Alberto Alesina and Roberto Perotti

The long shadow of the fall of the wall Daniel Gros

EU and China

I'm juggling quite a lot of stuff, so that's why I haven't posted. Plus you know the World Cup... But I'd like to paste the following article by the Economist, for your consideration:

The EU and Economic reform in June 2010: Not Enough...

EU to publish bank ‘stress tests’

Europe: A tent to attend to

‘Shared sense of direction’ at EU summit

Reining in Europe’s deficits is first step - By David Cameron and Fredrik Reinfeldt

What are PGS doing?

What are Portugal, Greece and Spain doing about their fiscal positions?

Here's an account. It is rather incomplete, but it gives some insights. For simplicity, and because it is originally in Portuguese, I include the picture below in this post. The conclusion is that they are doing something, and except the unavoidable tax hikes, the reforms seem to be quite positive for productivity, savings and growth. Hopefully some of these reforms will be permanent...

I will also try to see if I can find the links to the Stability and Growth programmes that these countries submitted to the European Commission.

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(This is a late addition to the original post)

For another overview of the situation with the PIIGS, here's what The Economist has to say.

How to read exclusive articles on the FT's website

I've made a comment about this in a previous post, but I'll make a more thorough point about it now in this post, if for no other reason that I'll refer to this post each time I'll link anything to a FT article.

Many times when I link to the FT's website, the article will not seem to be accessible. A message will pop up saying that you need to subscribe to access that type of article or that you have reached your limit for the number of article that you can view for a specific period of time (generally 30 days).

So here's the disenchanted magic: If you use firefox for example, although you won't be able to see the title of the article inside the window, because it is covered by the error message, you can still see it on the top left-hand corner of the screen, as the title of the window. All you have to do is to copy the title of the relevant article into google and search for it. Among the results that you'll obtain you'll find what seems, by all accounts, to a link to the window you were just redirected from this website. The only difference is that the link from google works, where as the link from this blog, or for that sake from the FT's own website does not.

So there you go. That's the googly magic of FT articles!

It's so annoying I'm starting to get depressed...

I feel for European Integration, particularly the economic part of it. It never has any respite. It is constantly attacked from every corner. Today the Euro is attacked for being too weak as a result of the fiscal crisis. Yesterday it was accused of threatening European competitiveness because monetary policy was too strict thus causing exchange rates between the Dollar and the Euro to be too high. Before that the problem was that European currencies fluctuated too much among themselves, thus creating comercial tensions between the EU's member states. We are sklerotic, we are Byzantine and we are lazy. We don't innovate and we are too rigid. Now we are too flexible and soon we'll be extinct. It seems that the only time we were happy was during the "30 glorious" years after WWII. How ridiculous that support for Europe is dependent on economic growth. This crisis will pass as all others have and as the next ones will. The world will not fall apart, and the Eurozone won't desintegrate. The European Dream will survive, but nay sayers will always find an excuse to say that it is falling apart.

It's going to be painful,but European economies will pull through. Commentators are talking as if this was the first time we had to tighten our belts... Portugal had to be bailed out by the IMF in the 1980s. My country has a lot of problems, but we pulled through. There's no reason Greece, or any other country, won't. We'll fix our houses; Germany, France, the Benelux, Sweden and Finland will make sure of this. In some years we'll be fine. The Euro will be close to parity with the USA, and eventually inflation will calm down. We might even experience a little bit of an export led boom, and hopefully the weight of fiscal pressures will revive budget rationalisations about defence expenditure. Not withstanding my ideosincracies though, Gideon Rachman is depressed... and his is a pretty contagious sort of depression. On the other hand, there's always Liberation's Jean Quatremer, who at least is slightly more realistic about the cyclical nature of this pessimism. Charles Wyplosz also offers some comfort in this article from Bloomberg.

The Southern European Problem: Not Speculation, Not Just Fiscal Profligacy, but Structural inconsistencies

Wolfgang Munchau of the FT has a very good article published online last night, about the problems in the Eurozone, particularly in its southern members. (here's a little trick for accessing restricted news reports from the FT: Copy paste the title of the relevant article on google and click on the relevant link. For some reason this grants you access to otherwise restricted articles) It says that the problem is not speculative financial attacks on the debt of these countries, nor that it is just fiscal profligacy. It argues instead that the root problem is structural, and that there is a need for economic reform of the labour market, where wages are much above productivity. As a result these countries are not competitive vis à vis its northern neighbours.

I completely agree with it. But I need data to confirm this. I'll be updating this post.

What future for the Euro after the bail out?

5 very interesting articles from www.VoxEU.org :

"Greece: The start of a systemic crisis of the Eurozone?" by Paul De Grauwe, from Leuven

"Greek lessons", by Michael Burda and Stefan Gerlach, felows of CEPR

"European Stabilisation Mechanism: Promises, realities and principles", by Charles Wyplosz, CEPR fellow

"Financial Stability beyond Greece: Making the most out of the European Stabilisation Mechanism", by Daniel Gros and Thomas Mayer, CEPS and Deutsch Bank respectively

"How to deal with sovereign default in Europe: Towards a Euro(pean) Monetary Fund", by Daniel Gros and Thomas Mayer, CEPS and Deutsch Bank respectively