The Eurozone Is A Serious Sovereign Debt

Now is a good time to ask: Is Europe holding up its end of the bargain? Specifically, is the euro zone's leadership delivering the broad-based economic recovery that is needed to give stressed countries like Greece a reasonable chance to meet their growth, employment, and fiscal objectives? Over the longer term, these questions are evidently of far greater consequence for Europe, and for the world, than are questions about whether tiny Greece can meet its fiscal obligations.

Unfortunately, the answers to these questions are also obvious. Since the global financial crisis, economic outcomes in the euro zone have been deeply disappointing. The failure of European economic policy has two, closely related, aspects: 1 the weak performance of the euro zone as a whole; and 2 the highly asymmetric outcomes among countries within the euro zone.

The poor overall performance is illustrated by Figure 1 below, which shows the euro area unemployment rate sincewith the U. Brookings In late and early unemployment rates in Europe and the United States were roughly equal, at about 10 percent of the labor force. Today the unemployment rate in the United States is 5.

Not incidentally, a very large share of euro area unemployment consists of younger workers; the inability of these workers to gain skills and work experience will adversely affect Europe's longer-term growth potential. The unevenness in economic outcomes among countries within the euro zone is illustrated by Figure 2, which compares the unemployment rate in Germany which accounts for about 30 percent of the euro area economy with that of the remainder of the euro zone.

Brookings Currently, the unemployment rate in the euro zone ex Germany exceeds 13 percent, compared to less than 5 percent in Germany. Other economic data show similar discrepancies within the euro zone between the "north" including Germany and the "south. The promise of the euro was both to increase prosperity and to foster closer European integration.

But current economic conditions are hardly building public confidence in European economic policymakers or providing an environment conducive to fiscal stabilization and economic reform; and European solidarity will not flower under a system which produces such disparate outcomes among countries. The risks for the European project posed by these economic developments are real, no matter what the reasons for them may be.

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In fact, the reasons are not so difficult to identify. I would not, by the way, put "structural rigidities" very high on this list. Structural reforms are important for long-run growth, but cost-saving measures are less relevant when many workers are already idle; moreover, structural problems have existed in Europe for a long time and so can't explain recent declines in performance.

What about the strength of the German economy and a few others relative to the rest of the euro zone, as illustrated by Figure 2?

As I discussed in an earlier postGermany has benefited from having a currency, the euro, with an international value that is significantly weaker than a hypothetical German-only currency would be. Germany's membership in the euro area has thus proved a major boost to German exports, relative to what they would be with an independent currency.

Nobody is suggesting that the well-known efficiency and quality of German production are anything other than good things, or that German firms should not strive to compete in export markets. German Chancellor Angela Merkel listens to Economy Minister Sigmar Gabriel at a news conference after a summit with political leaders looking at how to deal with the refugee crisis, in the Chancellery in Berlin, Germany, May 8, Within a fixed-exchange-rate system like the euro currency area, such persistent imbalances are unhealthy, reducing demand and growth in trading partners and generating potentially destabilizing financial flows.

Importantly, Germany's large trade surplus puts all the burden of adjustment on countries with trade deficits, who must undergo painful deflation of wages and other costs to become more competitive.]

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The Eurozone Is A Serious Sovereign Debt	2 days ago · BERNANKE: Europe has a bigger problem to fix than Greece's debt. Ben Bernanke, The Brookings Institution; Jul. 17, , AM. 14 minutes ago · Solution The European debt crisis had caused financial distress on a lot of people’s lives and also a serious challenge to the European Union. After November , countries like Spain, Portugal and Ireland had contagion effect from Greece. Since Greece had an essential role in the euro zone debt crisis, Greece should recover market’s. 12 hours ago · Get all the latest Debt news, reviews, tips and much more from Business Insider Australia, where our team of experts is committed to bringing you business news, trends and insights.
Symbolism my antonia	3 days ago · Request PDF \| Sovereign debt ratings and the country composition of cross-border holdings of euro area sovereign debt \| This paper documents how sovereign debt ratings shape the . 1 day ago · Eurozone finance ministers sparred on Friday over the size of a boost to their "firewall" against the debt crisis as strike-hit Spain faced new budget cuts to fend off market worries. 3 days ago · Written in a lively and entertaining style, Bust: Greece, the Euro, and the Sovereign Debt Crisis is an engaging and informative account of a country gone wrong and a must-read for anyone interested in world events and global economics. by Matthew Lynn. Political Science.

The Eurozone Is A Serious Sovereign Debt - state

Options range from about billion euros to billion euros and there still seemed to be scant agreement on how much cash was required to ward off a second attack on the eurozone amid concerns over Spain's financial situation. Wolfgang Schaeuble, finance minister of Germany, Europe's top economy and paymaster, repeated a figure of billion euros, made up of the billion euro ESM ceiling plus about billion euros already pledged to debt-wracked countries. As eurozone finance ministers entered two days of talks in Copenhagen, Ireland's Michael Noonan agreed that billion euros "seems to be going into the ballpark of what is required. The EFSF, set up in the eye of the storm but expiring in , has a maximum capacity of billion euros and many have proposed simply combining the ESM and the EFSF to arrive at a fraction under one trillion euros. But Schaeuble said: "It is more important for the financial markets that we overcome our problems. But billion is not possible for our side. The head of the eurozone ministers, Luxembourg Prime Minister Jean-Claude Juncker said he wanted a figure "a bit away" from billion euros. Belgian Finance Minister Steven Vanackere said he was "absolutely convinced" that the ministers would be able to clinch a deal in Copenhagen whereas Dutch Finance Minister Jan Kees de Jager also came out in favour of a higher firewall. Spanish borrowing costs have risen in recent weeks after Madrid admitted it had missed its deficit target of 6.

The Eurozone Is A Serious Sovereign Debt.