Tag Archives: currency

Prodi: Fiscal federalism for European finance

Former Italian prime minister Romano Prodi says Europe must centralize authority in order to save the Euro. If you’ve been following the roller coast ride of the past couple days on the equity, bond and FX markets, it’s hard to disagree.

When the euro was born everyone knew that sooner or later a crisis would occur. It was inevitable that, for a such a bold and unprecedented project, in some countries (even the most virtuous ones), mistakes would be made and unforeseeable events occur. It was also clear that the stability and growth pact was – as I have said before – “stupid”, not because it was mistaken in its objectives, but because it was founded on purely mathematical parameters without any discretionary powers or political instruments to enforce it. Germany and France were the first countries to violate it, although not in a destabilising way: their finance ministers decided to ignore the objections of the European Commission (possibly because they were “too big to fail”)… Continue reading

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Wolf on Eurozone

It’s been an eventful week on the global financial scene. Market crashes on Thursday, bungees back up a fair way, fears of Greek contagion on Friday, Eurozone commanders fire a trillion dollars at the problem on Sunday and the markets boom on Monday.

Problem solved? Obviously not. A bit of time has been bought. Martin Wolf of the FT has some ideas on what needs to be done with that time. Read the link now, before the FT takes it off their free offering. Wolf argues that the Eurozone countries have been diverging for years now between those who build up current account surpluses and those who have increasingly run deficits. Not only are fiscal imbalances now rampant, but the weaker countries need to catch up in terms of competitiveness. Continue reading