European debt crisis
From late 2009, fears of a sovereign debt crisis developed among fiscally conservative investors concerning some European states, with the situation becoming particularly tense in early 2010.[1][2] This included euro zone members Greece,[3] Ireland and Portugal and also some EU countries outside the area.[4] Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed has emerged less affected by the sovereign debt crisis as the government was unable to bail the banks out. In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.[5][6]
While the sovereign debt increases have been most pronounced in only a few euro zone countries they have become a perceived problem for the area as a whole.[7] In May 2011, the crisis resurfaced, concerning mostly the refinancing of Greek public debts.[8] The Greek people generally reject the austerity measures and have expressed their dissatisfaction with protests.[9][10] In late June 2011, the crisis situation was again brought under control with the Greek government managing to pass a package of new austerity measures and EU leaders pledging funds to support the country.[11]
Concern about rising government deficits and debt levels[12][13] across the globe together with a wave of downgrading of European government debt[14] created alarm in financial markets. On 9 May 2010, Europe's Finance Ministers approved a comprehensive rescue package worth almost a trillion dollars aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility.[15]
In 2010 the debt crisis was mostly centered on events in Greece, where the cost of financing government debt was rising. On 2 May 2010, the eurozone countries and the International Monetary Fund agreed to a €110 billion loan for Greece, conditional on the implementation of harsh austerity measures.[16] The Greek bail-out was followed by a €85 billion rescue package for Ireland in November,[17] and a €78 billion bail-out for Portugal in May 2011.[18][19]
This was the first eurozone crisis since its creation in 1999. As Samuel Brittan pointed out,[20] Jason Manolopoulos "shows conclusively that the eurozone is far from an optimum currency area".[21] Niall Ferguson also wrote in 2010 that "the sovereign debt crisis that is unfolding...is a fiscal crisis of the western world".[22] Axel Merk argued in a 2011 article that the dollar was in graver danger than the euro.[23]
Greek government funding crisis
Causes
![](http://upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Public_debt_percent_gdp_world_map_%282007%29.svg/300px-Public_debt_percent_gdp_world_map_%282007%29.svg.png)
The Greek economy was one of the fastest growing in the eurozone during the 2000s; from 2000 to 2007 it grew at an annual rate of 4.2% as foreign capital flooded the country.[24] A strong economy and falling bond yields allowed the government of Greece to run large structural deficits. According to an editorial published by the Greek right-wing newspaper Kathimerini, large public deficits are one of the features that have marked the Greek social model since the restoration of democracy in 1974. After the removal of the brutal right-wing military junta, the government wanted to bring disenfranchised left-leaning portions of the population into the economic mainstream.[25] In order to do so, successive Greek governments have, among other things, customarily run large deficits to finance public sector jobs, pensions, and other social benefits.[26] Since 1993 debt to GDP has remained above 100%.[27]
Initially currency devaluation helped finance the borrowing. After the introduction of the euro in Jan 2001, Greece was initially able to borrow due to the lower interest rates government bonds could command. The late-2000s financial crisis that began in 2007 had a particularly large effect on Greece. Two of the country's largest industries are tourism and shipping, and both were badly affected by the downturn with revenues falling 15% in 2009.[27]
To keep within the monetary union guidelines, the government of Greece (like many other governments in the Eurozone) had misreported the country's official economic statistics.[28][29] In the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees since 2001 for arranging transactions that hid the actual level of borrowing.[30]
The purpose of these deals made by several subsequent Greek governments was to enable them to continue spending while hiding the actual deficit from the EU.[31] The emphasis on the Greek case has tended to overshadow similar serious irregularities, usage of derivatives and "massaging" of statistics (to cope with monetary union guidelines) that have also been observed in cases of other EU countries; however Greece was the most publicized case.[citation needed]
In 2009, the government of George Papandreou revised its deficit from an estimated 6% (8% if a special tax for building irregularities were not to be applied) to 12.7%.[32] In May 2010, the Greek government deficit was estimated to be 13.6%[33] which is one of the highest in the world relative to GDP.[34] Greek government debt was estimated at €216 billion in January 2010.[35] Accumulated government debt was forecast, according to some estimates, to hit 120% of GDP in 2010.[36] The Greek government bond market relies on foreign investors, with some estimates suggesting that up to 70% of Greek government bonds are held externally.[37]
Estimated tax evasion costs the Greek government over $20 billion per year.[38] Despite the crisis, Greek government bond auctions have all been over-subscribed in 2010 (as of 26 January).[39] According to the Financial Times on 25 January 2010, "Investors placed about €20bn ($28bn, £17bn) in orders for the five-year, fixed-rate bond, four times more than the (Greek) government had reckoned on." In March, again according to the Financial Times, "Athens sold €5bn (£4.5bn) in 10-year bonds and received orders for three times that amount."[40]
Downgrading of debt
![]() | This article needs to be updated.(June 2011) |
On 27 April 2010, the Greek debt rating was decreased to the upper levels of 'junk' status by Standard & Poor's amidst hints of default by the Greek government.[41] Yields on Greek government two-year bonds rose to 15.3% following the downgrading.[42] Some analysts continue to question Greece's ability to refinance its debt. Standard & Poor's estimates that in the event of default investors would fail to get 30–50% of their money back.[41] Stock markets worldwide declined in response to this announcement.[43]
Following downgradings by Fitch and Moody's, as well as S&P,[44] Greek bond yields rose in 2010, both in absolute terms and relative to German government bonds.[45] Yields have risen, particularly in the wake of successive ratings downgrading. According to The Wall Street Journal, "with only a handful of bonds changing hands, the meaning of the bond move isn't so clear."[46]
On 3 May 2010, the European Central Bank suspended its minimum threshold for Greek debt "until further notice",[47] meaning the bonds will remain eligible as collateral even with junk status. The decision will guarantee Greek banks' access to cheap central bank funding, and analysts said it should also help increase Greek bonds' attractiveness to investors.[48] Following the introduction of these measures the yield on Greek 10-year bonds fell to 8.5%, 550 basis points above German yields, down from 800 basis points earlier.[49] As of 26 November 2010, Greek 10-year bonds were trading at an effective yield of 11.8%.[50]
Austerity and loan agreement
On 5 March 2010, the Greek parliament passed the Economy Protection Bill, expected to save €4.8 billion[51] through a number of measures including public sector wage reductions. On 23 April 2010, the Greek government requested that the EU/IMF bailout package be activated.[52] The IMF had said it was "prepared to move expeditiously on this request".[53] Greece needed money before 19 May, or it would face a debt roll over of $11.3bn.[54][55][56]
The European Commission, the IMF and ECB set up a tripartite committee (the Troika) to prepare an appropriate programme of economic policies underlying a massive loan. The Troika was led by Servaas Deroose, from the European Commission, and included also Poul Thomsen (IMF) and Klaus Masuch (ECB) as junior partners. On 2 May 2010, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consisted of an immediate €45 billion in loans to be provided in 2010, with more funds available later. A total of €110 billion has been agreed.[57][58] The interest for the eurozone loans is 5%, considered to be a rather high level for any bailout loan. According to EU officials, France and Germany demanded that their military dealings with Greece be a condition of their participation in the financial rescue.[59] The government of Greece agreed to impose a fourth and final round of austerity measures. These include:[60]
- Public sector limit of €1,000 introduced to bi-annual bonus, abolished entirely for those earning over €3,000 a month.
- An 8% cut on public sector allowances and a 3% pay cut for DEKO (public sector utilities) employees.
- Limit of €800 per month to 13th and 14th month pension installments; abolished for pensioners receiving over €2,500 a month.
- Return of a special tax on high pensions.
- Changes were planned to the laws governing lay-offs and overtime pay.
- Extraordinary taxes imposed on company profits.
- Increases in VAT to 23%, 11% and 5.5%.
- 10% rise in luxury taxes and taxes on alcohol, cigarettes, and fuel.
- Equalization of men's and women's pension age limits.
- General pension age has not changed, but a mechanism has been introduced to scale them to life expectancy changes.
- A financial stability fund has been created.
- Average retirement age for public sector workers has increased from 61 to 65.[61]
- Public-owned companies to be reduced from 6,000 to 2,000.[61]
On 5 May 2010, a nationwide general strike was held in Athens to protest to the planned spending cuts and tax increases. Three people were killed, dozens injured, and 107 arrested.[62]
According to research published on 5 May 2010, by Citibank, the EMU loans will be pari passu and not senior like those of the IMF. In fact the seniority of the IMF loans themselves has no legal basis but is respected nonetheless. The loans should cover Greece's funding needs for the next three years (estimated at €30 billion for the rest of 2010 and €40 billion each for 2011 and 2012). Citibank finds the fiscal tightening "unexpectedly tough". It will amount to a total of €30 billion (i.e. 12.5% of 2009 Greek GDP) and consist of 5% of GDP tightening in 2010 and a further 4% tightening in 2011.[63]
Danger of default
Without a bailout agreement, there was a possibility that Greece would prefer to default on some of its debt. The premiums on Greek debt had risen to a level that reflected a high chance of a default or restructuring. Analysts gave a wide range of default probabilities, estimating a 25% to 90% chance of a default or restructuring.[64][65] A default would most likely have taken the form of a restructuring where Greece would pay creditors only a portion of what they were owed, perhaps 50 or 25 percent.[66]It has been claimed that this could destabilise the Euro Interbank Offered Rate, which is backed by government securities.[67]
Some experts have nonetheless argued that the best option at this stage for Greece is to engineer an “orderly default” on Greece’s public debt which would allow Athens to withdraw simultaneously from the eurozone and reintroduce a national currency, such as its historical drachma, at a debased rate [68] (essentially, coining money). Economists who favor this approach to solve the Greek debt crisis typically argue that a delay in organising an orderly default would wind up hurting EU lenders and neighboring European countries even more.[69]
At the moment, because Greece is a member of the eurozone, it cannot unilaterally stimulate its economy with monetary policy. For example, the U.S. Federal Reserve expanded its balance sheet by over $1.3 trillion USD since the global financial crisis began, essentially printing new money and injecting it into the system by purchasing outstanding debt.[70]
Greece represents only 2.5% of the eurozone economy.[71] Despite its size, the danger is that a default by Greece will cause investors to lose faith in other eurozone countries. This concern is focused on Portugal and Ireland, both of whom have high debt and deficit issues.[72] Italy also has a high debt, but its budget position is better than the European average, and it is not considered among the countries most at risk.[73] Recent rumours raised by speculators about a Spanish bail-out were dismissed by Spanish Prime Minister José Luis Rodríguez Zapatero as "complete insanity" and "intolerable".[74] Spain has a comparatively low debt among advanced economies, at only 53% of GDP in 2010, more than 20 points less than Germany, France or the US, and more than 60 points less than Italy, Ireland or Greece,[75] and it doesn't face a risk of default.[76] Spain and Italy are far larger and more central economies than Greece; both countries have most of their debt controlled internally, and are in a better fiscal situation than Greece and Portugal, making a default unlikely unless the situation gets far more severe.[77]
Objections to proposed policies
- See also May 2010 Greek protests
The crisis is seen as a justification for imposing fiscal austerity[78] on Greece in exchange for European funding which would lower borrowing costs for the Greek government.[79] The negative impact of tighter fiscal policy could offset the positive impact of lower borrowing costs and social disruption could have a significantly negative impact on investment and growth in the longer term. Joseph Stiglitz has also criticised the EU for being too slow to help Greece, insufficiently supportive of the new government, lacking the will power to set up sufficient "solidarity and stabilisation framework" to support countries experiencing economic difficulty, and too deferential to bond rating agencies.[80]
As an alternative to the bailout agreement, Greece could have left the eurozone. Wilhelm Hankel, professor emeritus of economics at the University of Frankfurt am Main suggested[81] in an article published in the Financial Times that the preferred solution to the Greek bond 'crisis' is a Greek exit from the euro followed by a devaluation of the currency. Fiscal austerity or a euro exit is the alternative to accepting differentiated government bond yields within the Euro Area. If Greece remains in the euro while accepting higher bond yields, reflecting its high government deficit, then high interest rates would dampen demand, raise savings and slow the economy. An improved trade performance and less reliance on foreign capital would be the result.[citation needed]
In the documentary Debtocracy made by a group of Greek journalists, it is argued that Greece should create an audit commission, and force bondholders to suffer from losses, like Ecuador did.
Spread beyond Greece
![](http://upload.wikimedia.org/wikipedia/commons/thumb/4/4b/Piiggs_surplus_2002-2009.png/350px-Piiggs_surplus_2002-2009.png)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/f/f4/Long_term_interest_rates.png/350px-Long_term_interest_rates.png)
![](http://upload.wikimedia.org/wikipedia/commons/thumb/3/39/Piiggs_balance_sheet_2009.png/350px-Piiggs_balance_sheet_2009.png)
One of the central concerns prior to the bailout was that the crisis could spread beyond Greece. The crisis has reduced confidence in other European economies. Ireland, with a government deficit in 2010 of 32.4% of GDP, Spain with 9.2%, and Portugal at 9.1% are most at risk.[83] According to the UK Financial Policy Committee "Market concerns remain over fiscal positions in a number of euro area countries and the potential for contagion to banking systems."[84]
Financing needs for the eurozone in 2010 come to a total of €1.6 trillion, while the US is expected to issue US$1.7 trillion more Treasury securities in this period,[85] and Japan has ¥213 trillion of government bonds to roll over.[86] The countries most at risk are those that rely on foreign investors to fund their government sector. According to Ferguson similarities between the U.S. and Greece should not be dismissed.[87]
For 2010, the OECD forecasts $16,000bn will be raised in government bonds among its 30 member countries. Greece has been the notable example of an industrialised country that has faced difficulties in the markets because of rising debt levels. Even countries such as the US, Germany and the UK, have had fraught moments as investors shunned bond auctions due to concerns about public finances and the economy.[88]
Ireland
The Irish sovereign debt crisis was not based on government over-spending, but from the state guaranteeing the six main Irish-based banks who had financed a property bubble. On 29 September 2008 the Finance Minister Brian Lenihan, Jnr issued a one-year guarantee to the banks' depositors and bond-holders. He renewed it for another year in September 2009 soon after the launch of the National Asset Management Agency, a body designed to remove bad loans from the six banks.
The December 2008 hidden loans controversy within Anglo Irish Bank had led to the resignations of three executives, including chief executive Sean FitzPatrick. A mysterious "Golden Circle" of ten businessmen are being investigated over shares they purchased in Anglo Irish Bank, using loans from the bank, in 2008. The Anglo Irish Bank Corporation Bill 2009 was passed to nationalise Anglo Irish Bank was voted through Dáil Éireann and passed through Seanad Éireann without a vote on 20 January 2009.[89] President Mary McAleese then signed the bill at Áras an Uachtaráin the following day, confirming the bank's nationalisation.[90]
In April 2010, following a marked increase in Irish 2-year bond yields, Ireland's NTMA state debt agency said that it had "no major refinancing obligations" in 2010. Its requirement for €20 billion in 2010 was matched by a €23 billion cash balance, and it remarked: "We're very comfortably circumstanced".[91] On 18 May the NTMA tested the market and sold a €1.5 billion issue that was three times oversubscribed.[92]
By September 2010 the banks could not raise finance and the bank guarantee was renewed for a third year. This had a negative impact on Irish government bonds, government help for the banks rose to 32% of GDP, and so the government started negotiations with the ECB and the IMF, resulting in the €85 billion "bailout" agreement of 29 November 2010.[93][94] In February the government lost the ensuing Irish general election, 2011. In April 2011, despite all the measures taken, Moody's downgraded the banks' debt to junk status.[95] Debate continues on whether Ireland will need a "second bailout".[96]
Portugal
A report published in January 2011 by the Diário de Notícias[citation needed] demonstrated that in the period between the Carnation Revolution in 1974 and 2010, the democratic Portuguese Republic governments have encouraged over expenditure and investment bubbles through unclear public-private partnerships, funding numerous ineffective and unnecessary external counsultancy and advising committees and firms, allowing considerable slippage in state-managed public works, inflating top management and head officers's bonuses and wages, persistent and lasting recruitment policy that boosts the number of redundant public servants,[citation needed] along with the help of risky credit, public debt creation, and mismanaged European structural and cohesion funds across almost four decades, that the Prime Minister Sócrates's cabinet was not able to forecast or prevent at first hand in 2005, and later was incapable of doing anything to remediate the situation when the country was on the verge of bankruptcy by 2011.[97]
Robert Fishman, in the New York Times article "Portugal's Unnecessary Bailout", points out that Portugal fell victim of successive waves of speculation by pressure from bond traders, rating agencies and speculators[citation needed]. In the first quarter of 2010, before markets pressure, Portugal had one of the best rates of economic recovery in the EU. Industrial orders, exports, entrepreneurial innovation and high-school achievement the country matched or even surpassed its neighbors in Western Europe.[98]
On 16 May 2011 the Eurozone leaders officially approved a €78 billion bailout package for Portugal. The bailout loan will be equally split between the European Financial Stabilisation Mechanism, the European Financial Stability Facility, and the International Monetary Fund.[99] According to the Portuguese finance minister, the average interest rate on the bailout loan is expected to be 5.1%[100] As part of the bailout, Portugal agreed to eliminate its golden share in Portugal Telecom to pave the way for privatization.[101][102] Portugal became the third Eurozone country, after Ireland and Greece, to receive a bailout package.
On 6 July 2011 it was confirmed that the ratings agency Moody's had cut Portugal's credit rating to junk status, Moody's also launched speculation that Portugal may follow Greece in requesting a second bailout.[103]
Spain
Shortly after the announcement of the EU's new "emergency fund" for eurozone countries in early May 2010, Spain's government announced new austerity measures designed to further reduce the country's budget deficit.[104] The socialist government had hoped to avoid such deep cuts, but weak economic growth as well as domestic and international pressure forced the government to expand on cuts already announced in January. As one of the largest eurozone economies the condition of Spain's economy is of particular concern to international observers, and faced pressure from the United States, the IMF, other European countries and the European Commission to cut its deficit more aggressively.[105][106]
According to the Financial Times, Spain has succeeded in trimming its deficit from 11.2% of GDP in 2009 to 9.2% in 2010.[107] It should be noted that Spain's public debt (60.1% of GDP in 2010) is significantly lower than that of Greece (142.8%), Italy (119%), Portugal (93%), Ireland (96.2), and Germany (83.2%), France (81.7%) and the United Kingdom (80.0%).[108][109]
United Kingdom
According to the Financial Policy Committee "Any associated disruption to bank funding markets could spill over to UK banks."[84] Bank of England governor Mervyn King declared that the UK is very much at risk from a domino-fall of defaults and called on banks to build up more capital when financial conditions allowed.[84] The incoming coalition government declared its austerity measures to be essential lest the markets lose confidence in the UK too, that its situation was essentially the same as Portugal's but that it was merely fortunate in having long-dated debt.[citation needed]
Iceland
Iceland suffered the failure of its banking system and a subsequent economic crisis. However, the financial position of the government has steadily improved since the crash even if the economic recovery has been more sluggish than earlier expected.[110] Before the crash of the three largest commercial banks in Iceland, with Glitnir, Landsbanki and Kaupthing, jointly owed over 10 times Iceland's GDP. In October 2008, the Icelandic parliament passed emergency legislation to minimise the impact of the financial crisis. The Financial Supervisory Authority of Iceland used permission granted by the emergency legislation to take over the domestic operations of the three largest banks.[111]
The foreign operations of the banks, however, went into receivership. As a result, the country has not been seriously affected by the European sovereign debt crisis from 2010. In large part this is due to the success of an IMF Stand-By-Arrangement in the country since November 2008. The government has enacted a program of medium term fiscal consolidation, based on expenditure cuts and broad based and significant tax hikes. As a result, central government debts have been stabilised at around 80-90 percent of GDP.[112] Capital controls were also enacted and the work began to resurrect a sharply downsized domestic banking system on the ruins of its gargantuan international banking system, which the government was unable to bail out.[113][114]
Despite a contentious debate with Britain and the Netherlands over the question of a state guarantee on the Icesave deposits of Landsbanki in these countries, credit default swaps on Icelandic sovereign debt have steadily declined from over 1000 points prior to the crash in 2008 to around 200 points in June 2011. Further, on 9 June 2011, the Icelandic government successfully raised 1$ billion with a bond issue indicating that international investors have given the government and the new banking system, with two of the three biggest banks now in foreign hands, a clean bill of health.[113][114]
Belgium
In 2010, Belgium's public debt was 100% of its GDP – the third highest in the Euro zone after Greece and Italy[115] and there were doubts about the financial stability of the banks.[116] After inconclusive elections in June 2010, by July 2011[117] the country still had only a caretaker government as parties from the two main language groups in the country (Flemish and Walloon) were unable to reach agreement on how to form a majority government.[115] Financial analysts forecast that Belgium would be the next country to be hit by the financial crisis as Belgium's borrowing costs rose.[116]
However the government deficit of 5% was relatively modest and Belgian government 10-year bond yields in November 2010 of 3.7% were still below those of Ireland (9.2%), Portugal (7%) and Spain (5.2%).[116] Furthermore, thanks to Belgium's high personal savings rate, the Belgian Government financed the deficit from mainly domestic savings, making it less prone to fluctuations of international credit markets.[118]
Solutions to the crisis
EU emergency measures
On 9 May 2010 the 27 member states of the European Union agreed to create the European Financial Stability Facility (EFSF), a legal instrument[119] aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty.[120]
In order to reach these goals the Facility is devised in the form of a special purpose vehicle (SPV) that will sell bonds and use the money it raises to make loans up to a maximum of € 440 billion to eurozone nations in need. The bonds will be backed by guarantees given by the European Commission representing the whole EU, the eurozone member states, and the IMF. The new entity will sell debt only after an aid request is made by a country.[121]
The EFSF will be combined to a € 60 billion loan coming from the European financial stabilisation mechanism (reliant on guarantees given by the European Commission using the EU budget as collateral) and to a € 250 billion loan backed by the IMF in order to obtain a financial safety net up to € 750 billions.[122][123] The agreement allows the European Central Bank to start buying government debt which is expected to reduce bond yields.[124] (Greek bond yields fell from over 10% to just over 5%;[125] Asian bonds yields also fell with the EU bailout.[126])
The ECB has announced a series measures aimed at reducing volatility in the financial markets and at improving liquidity:[127]
- First, it began open market operations buying government and private debt securities.
- Second, it announced two 3-month and one 6-month full allotment of Long Term Refinancing Operations (LTRO's).
- Thirdly, it reactivated the dollar swap lines[128] with Federal Reserve support.[129]
Subsequently, the member banks of the European System of Central Banks started buying government debt.[130]
Stocks worldwide surged after this announcement as fears that the Greek debt crisis would spread subsided,[131] some rose the most in a year or more.[132] The Euro made its biggest gain in 18 months,[133] before falling to a new four-year low a week later.[134] Commodity prices also rose following the announcement.[135] The dollar Libor held at a nine-month high.[136] Default swaps also fell.[137] The VIX closed down a record almost 30%, after a record weekly rise the preceding week that prompted the bailout.[138]
Despite the moves by the EU, the European Commissioner for Economic and Financial Affairs, Olli Rehn, called for "absolutely necessary" deficit cuts by the heavily indebted countries of Spain and Portugal.[139] Private sector bankers and economists also warned that the threat from a double dip recession has not faded. Stephen Roach, chairman of Morgan Stanley Asia, warned about this threat saying "When you have a vulnerable post-crisis economic recovery and crises reverberating in the aftermath of that, you have some very serious risks to the global business cycle."[140] Nouriel Roubini said the new credit available to the heavily indebted countries did not equate to an immediate revival of economic fortunes: "While money is available now on the table, all this money is conditional on all these countries doing fiscal adjustment and structural reform."[141]
After initially falling to a four-year low early in the week following the announcement of the EU guarantee packages, the euro rose as hedge funds and other short-term traders unwound short positions and carry trades in the currency.[142]
While the aid package has so far averted a financial panic, international credit rating agencies consider that eurozone countries such as Portugal continue to have economic difficulties.[143]
In July 2011, it was agreed during the EU summit that future wages of the Greek army will be paid by the EU through EU loans, given at lower rates of interest.[144]
Kicking the can
European Union leaders have made two major proposals for ensuring fiscal stability in the long term. The first proposal is the creation of the European Financial Stability Facility.[145] The second is a single authority responsible for tax policy oversight and government spending coordination of EU member countries, temporarily called the European Treasury.[146] The stability facility is financially backed by the EU and the IMF. The European Parliament, the European Council, and especially the European Commission, can all provide some support for the treasury while it is still being built. However, strong European Commission oversight in the fields of taxation and budgetary policy and the enforcement mechanisms that go with it have sometimes been described as potential infringements on the sovereignty of eurozone member states[147]
Some senior German policy makers went as far as to say that emergency bailouts should bring harsh penalties to EU aid recipients such as Greece.[148] Others argue that an abrupt return to "non-Keynesian" financial policies is not a viable solution and predict the deflationary policies now being imposed on countries such as Greece and Italy might prolong and deepen their recessions.[68][149] The Economist has suggested that ultimately the Greek "social contract," which involves "buying" social peace through public sector jobs, pensions, and other social benefits, will have to be changed to one predicated more on price stability and government restraint if the euro is to survive.[150] As Greece can no longer devalue its way out of economic difficulties it will have to more tightly control spending than it has since the inception of the Third Hellenic Republic.
Regardless of the corrective measures chosen to solve the current predicament, as long as cross border capital flows remain unregulated in the Euro Area,[151] asset bubbles[152] and current account imbalances are likely to continue. For example, a country that runs a large current account or trade deficit (i.e., it imports more than it exports) must also be a net importer of capital; this is a mathematical identity called the balance of payments. In other words, a country that imports more than it exports must also borrow to pay for those imports. Conversely, Germany's large trade surplus (net export position) means that it must also be a net exporter of capital, lending money to other countries to allow them to buy German goods.[153] The 2009 trade deficits for Italy, Spain, Greece, and Portugal were estimated to be $69.5 billion, $34.4B and $18.6B, respectively ($122.5B total), while Germany's trade surplus was $109.7B.[154] A similar imbalance exists in the U.S., which runs a large trade deficit (net import position) and therefore is a net borrower of capital from abroad. Ben Bernanke warned of the risks of such imbalances in 2005, arguing that a "savings glut" in one country with a trade surplus can drive capital into other countries with trade deficits, artificially lowering interest rates and creating asset bubbles.[155][156]
A country with a large trade surplus would generally see the value of its currency appreciate relative to other currencies, which would reduce the imbalance as the relative price of its exports increases. This currency appreciation occurs as the importing country sells its currency to buy the exporting country's currency used to purchase the goods. However, many of the countries involved in the crisis are on the Euro, so this is not an available solution at present. Alternatively, trade imbalances might be addressed by changing consumption and savings habits. For example, if a country's citizens saved more instead of consuming imports, this would reduce its trade deficit. Likewise, reducing budget deficits is another method of raising a country's level of saving. Capital controls that restrict or penalize the flow of capital across borders is another method that can reduce trade imbalances. Interest rates can also be raised to encourage domestic saving, although this benefit is offset by slowing down an economy and increasing government interest payments.[157]
The suggestion has been made that long term stability in the eurozone requires a common fiscal policy rather than controls on portfolio investment.[158] In exchange for cheaper funding from the EU, Greece and other countries, in addition to having already lost control over monetary policy and foreign exchange policy since the euro came into being, would therefore also lose control over domestic fiscal policy.
Finally, there has been some criticism over the austerity measures implemented by most European nations to counter this debt crisis. Apart from arguments over whether or not austerity, rather than increased or frozen spending, is a macroeconomic solution, there has also been a sense of unjust crisis management which mostly stems from the notion that, as a direct consequence of the Financial crisis of 2007–2010, the working population should not be held responsible for the economic mismanagement errors of economists, investors, and bankers. Over 23 million EU workers have become unemployed as a consequence of the global economic crisis of 2007–2010, while thousands of bankers across the EU have become millionaires despite collapse or nationalization (ultimately paid for by taxpayers) of institutions they worked for during the crisis, a fact that has led many to call for additional regulation of the banking sector across not only Europe, but the entire world.[159]
Reform and recovery
In November, as concerns started to resurface about the fiscal health of Ireland, Greece and Portugal, EU President Herman Van Rompuy said "If we don’t survive with the euro zone we will not survive with the European Union."[160]
In March 2011 a new reform of the Stability and Growth Pact was initiated, aiming at straightening the rules by adopting an automatic procedure for imposing of penalties in case of breaches of either the deficit or the debt rules.[161][162]
Subsequently, the proposed European treasury was implemented as the temporary European Financial Stability Facility, which will function until the permanent European Stability Mechanism is established following ratification of its treaty. In July 2011, it was agreed during the EU summit that the EFSF will be given more powers to intervene in the secondary markets, thus dramatically socializing risk in the eurozone, which ends the crisis.[163]
With a view to tackle Europe's recent financial crisis, India has agreed to lend two million dollars. On the 3rd of July,2011 the parliament approved to provide over Rs.9003 Crore in loans to the multilateral agency's (IMF) New Arrangements to Borrow (NAB). This will help to fund the bailouts in Europe and assist the recovery. [164]
Two-currencies speculation
Bloomberg has suggested that, if the Greek and Irish bailouts should fail, an alternative is for Germany to leave the eurozone in order to save the currency through depreciation[165] instead of austerity. The Wall Street Journal conjectures that Germany could return to the Deutsche Mark,[166] or create another currency union[167] with the Netherlands, Austria, Finland, and other European countries that have a positive current account balance, such as Denmark, Norway, and Sweden. A monetary union of these seven current account surplus countries would create the world's largest creditor bloc that is bigger than China[168] or Japan. Without the German-led bloc, the WSJ and other writers suggest, a residual French-led euro will then have the flexibility to keep interest rates[169] low and engage in quantitative easing[170] or fiscal stimulus in support of a job-targeting economic policy[171] instead of inflation targeting in the current configuration.
Heterodox recommendations
The school of economists who are, broadly, adherents of the post-Keynesian school of the Modern Monetary Theory have condemned the introduction of the Euro currency from the beginning[172], on the basis that the Eurozone does not fulfill the necessary criteria for an optimal currency area. The latter view is supported also by non-Keynesian economists, such as Luca A. Ricci, of the IMF[173]. Others have even declared an urgent need for more radical shift in perspective, "a new science of macroeconomics"[174].
As the debt crisis expanded beyond Greece, these economists continued to advocate a, albeit more forcefully, the disbandment of Eurozone and, if that was not immediately feasible, recommended that Greece, along with the other debtor nations unilaterally leave the Eurozone, default on their debts and regain their fiscal and monetary sovereignty, i.e. re-adopt national currencies.[175][176] Others have suggested that it's Germany that should first leave the Eurozone in order to save it[177], with an anticipated "huge boost" to its members' competitiveness via the "(likely) substantial fall in the Euro against the newly reconstituted Deutsche Mark".
Controversies
Odious debt
Some protesters, commentators such as Libération correspondent Jean Quatremer and the Liège based NGO CADTM allege that the debt should be characterized as odious debt.[citation needed] The Greek documentary Debtocracy examines whether the recent Siemens scandal and uncommercial ECB loans which were conditional on the purchase of military aircraft and submarines are evidence that the loans amount to odious debt and that an audit would result in invalidation of a large amount of the debt.
Controversy about National Statistics
The revision of Greece’s 2009 budget deficit from a forecast of "6-8% of GDP" to 12.7% by the new Pasok Government in late 2009 (a number which, after reclassification of expenses under IMF/EU supervision was further raised to 15.4% in 2010) has been cited as one of the issues that ignited the Greek debt crisis. This added a new dimension in the world financial turmoil, as the issues of "creative accounting" and manipulation of statistics by several nations came into focus, potentially undermining investor confidence.
The focus has naturally remained on Greece due to its debt crisis, however there has been a growing number of reports about manipulated statistics by EU and other nations aiming, as was the case for Greece, to mask the sizes of public debts and deficits. These have included analyses of examples in several countries [178] [179] [180] [181] or have focused on Italy, [182] the United Kingdom, [183] [184] [185] [186] [187] [188] [189] [190] Spain, [191] and the United States [192] [193] [194][195] among others.
Credit rating agencies
The international U.S. based credit rating agencies – Moody's, S&P and Fitch – have played a central[196] and controversial role[197] in the current European bond market crisis.[198] As with the housing bubble[199][200] and the Icelandic crisis,[201][202] the ratings agencies have been under fire. The agencies have been accused of giving overly generous ratings due to conflicts of interest.[203] Ratings agencies also have a tendency to act conservatively, and to take some time to adjust when a firm or country is in trouble.[204]
In the case of Greece, the market responded to the crisis before the downgrades, with Greek bonds trading at junk levels several weeks before the ratings agencies began to describe them as such.[196] In a response to the downgrading of Greek governmental bonds the ECB announced on 3 May that it will accept as collateral all outstanding and new debt instruments issued or guaranteed by the Greek government, regardless of the nation's credit rating.[205]
Government officials have criticized the ratings agencies. Following downgrades of Greece, Spain and Portugal that roiled financial markets, Germany's foreign minister Guido Westerwelle said that traders should not take global rating agencies "too seriously" and called for an "independent" European rating agency, which could avoid the conflicts of interest that he claimed US-based agencies faced.[196][206] European leaders are reportedly studying the possibility of setting up a European ratings agency in order that the private U.S.-based ratings agencies have less influence on developments in European financial markets in the future.[207][208] According to German consultant company Roland Berger, setting up a new ratings agency would cost 300 million Euros and could be operating by 2014.[209]
Due to the failures of the ratings agencies, European regulators will be given new powers to supervise ratings agencies.[197] With the creation of the European Supervisory Authority in January 2011 the European Union set up a whole range of new financial regulatory institutions,[210] including the European Securities and Markets Authority (ESMA),[211] which will become the EU’s single credit-ratings firm regulator on 7 July.[212] Credit-ratings companies have to comply with the new standards or be denied operation on EU territory, says ESMA Chief Steven Maijoor.[213]
But attempts to regulate more strictly credit rating agencies in the wake of the European sovereign debt crisis have been rather unsuccessful. Some European financial law and regulation experts have argued that the hastily drafted, unevenly transposed in national law, and poorly enforced EU rule on rating agencies (Règlement CE n° 1060/2009) has had little effect on the way financial analysts and economists interpret data or on the potential for conflicts of interests created by the complex contractual arrangements between credit rating agencies and their clients" [214]
Media
There has been considerable controversy about the role of the English-language press in the regard to the bond market crisis.[215][216] The Spanish Prime Minister José Luis Rodríguez Zapatero has suggested that the recent financial market crisis in Europe is an attempt to draw international capital away from the euro[217][218] in order that countries, such as the U.K. and the U.S., can continue to fund their large external deficits which are matched by large government deficits.[12] The U.S. and U.K. do not have large domestic savings pools to draw on and therefore are dependent on external savings.[219] This is not the case in the eurozone which is self funding.[220] Zapatero ordered the Centro Nacional de Inteligencia intelligence service (National Intelligence Center, CNI in Spanish) to investigate the role of the "Anglo-Saxon media" in fomenting the crisis.[221][222][223][224][225][226][227] No results have so far been reported from this investigation.
Greek Prime Minister Papandreou is quoted as saying that there was no question of Greece leaving the euro and suggested that the crisis was politically as well as financially motivated. "This is an attack on the eurozone by certain other interests, political or financial".[228] At the same time, a statistic on the articles referenced here shows that only "bad" news was propagated by the media and never "good" news.
Role of speculators
Financial speculators and hedge funds engaged in selling euros have also been accused by both the Spanish and Greek Prime Ministers of worsening the crisis.[229][230] Angela Merkel has stated that "institutions bailed out with public funds are exploiting the budget crisis in Greece and elsewhere."[231]
The role of Goldman Sachs[232] in Greek bond yield increases is also under scrutiny.[233] It is not yet clear to what extent this bank has been involved in the unfolding of the crisis or if they have made a profit as a result of the sell-off on the Greek government debt market.
In response to accusations that speculators were worsening the problem, some markets banned naked short selling for a few months.[234]
See also
European nations:
General:
- List of countries by credit rating
- Modern Monetary Theory
- Crisis situations and protests in Europe since 2000
- 2000s commodities boom
References
- ^ George Matlock (16 February 2010). "Peripheral euro zone government bond spreads widen". Reuters. Retrieved 28 April 2010.
- ^ "Acropolis now". The Economist. 29 April 2010. Retrieved 22 June 2011.
- ^ Brian Blackstone, Tom Lauricella, and Neil Shah (5 February 2010). "Global Markets Shudder: Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery". The Wall Street Journal. Retrieved 10 May 2010.
{{cite news}}
: CS1 maint: multiple names: authors list (link) - ^ Bruce Walker (9 April 2010). "Greek Debt Crisis Worsens". The New American. Retrieved 28 April 2010.
- ^ "Greek/German bond yield spread more than 1,000 bps". Financialmirror.com. 28 April 2010. Retrieved 5 May 2010.
- ^ "Gilt yields rise amid UK debt concerns". Financial Times. 18 February 2010. Retrieved 15 April 2011.
- ^ "How the Euro Became Europe's Greatest Threat," Der Spiegel, 20 June 2011.
- ^ "Greek debt crisis: eurozone ministers meet amid deepening gloom," The Guardian, 19 June 2011.
- ^ "A long day in Greece," The Economist, 16 June 2011
- ^ "Athens protests: Syntagma Square on frontline of European austerity protests," The Guardian, 19 June 2011.
- ^ "EU leaders pledge to do what is needed to help Greece". BBC, 23 June 2011
- ^ a b "Britain's deficit third worst in the world, table". The Daily Telegraph. London. 19 February 2010. Retrieved 29 April 2010.
- ^ "Fiscal Deficit and Unemployment Rate, FT". Retrieved 5 May 2010.
- ^ "Timeline: Greece's economic crisis". Reuters. 3 February 2010. Retrieved 29 April 2010.
- ^ "EU ministers offer 750bn-euro plan to support currency". BBC News. 10 May 2010. Retrieved 11 May 2010.
- ^ Gabi Thesing and Flavia Krause-Jackson (3 May 2010). "Greece Gets $146 Billion Rescue in EU, IMF Package". Bloomberg. Retrieved 10 May 2010.
- ^ Treanor, Jill and Elliott, Larry Ireland to get €85bn loan in deal that will nationalise its banks The Guardian, 24 November 2010, Retrieved 19 May 2011
- ^ Sarah Butler (11 April 2011). "Portugal prepares to meet EU and IMF to negotiate bail-out". The Daily Telegraph. UK. Retrieved 18 April 2011.
- ^ Portugal's 78bn euro bail-out is formally approved BBC News Business, 16 May 2011, Retrieved 19 May 2011
- ^ Samuel Brittan. "Who is winning in the race for recovery". Financial Times. Retrieved 12 May 2011.
- ^ Manolopoulos, J. Greece's 'Odious' Debt: The Looting of the Hellenic Republic by the Euro, the Political Elite and the Investment Community. London, May 2011: Anthem Press.
{{cite book}}
: CS1 maint: location (link) - ^ Niall Ferguson (10 February 2010). "A Greek crisis is coming to America". Financial Times. Retrieved 18 April 2011.
- ^ Merk, Axel (2011) Dollar in graver danger than the euro The Financial Times, 11 May 2011, Retrieved 19 May 2011
- ^ "Greece: Foreign Capital Inflows Up « Embassy of Greece in Poland Press & Communication Office". Greeceinfo.wordpress.com. 17 September 2009. Retrieved 5 May 2010.
- ^ Floudas, Demetrius A. "The Greek Financial Crisis 2010: Chimerae and Pandaemonium". Hughes Hall Seminar Series, March 2010: University of Cambridge.
{{cite news}}
: CS1 maint: location (link) - ^ "Back down to earth with a bang". Kathimerini (English Edition). 3 March 2010. Retrieved 12 May 2010.
- ^ a b "Onze questions-réponses sur la crise grecque – Economie – Nouvelobs.com". Retrieved 2 May 2010.[dead link]
- ^ "EU Stats Office: Greek Economy Figures Unreliable – ABC News". Retrieved 2 May 2010.[dead link]
- ^ "Rehn: No other state will need a bail-out – EU Observer". Retrieved 6 May 2010.
- ^ "Greece Paid Goldman $300 Million To Help It Hide Its Ballooning Debts – Business Insider". Retrieved 6 May 2010.
- ^ Story, Louise; Thomas Jr, Landon; Schwartz, Nelson D. (14 February 2010). "Wall St. Helped to Mask Debt Fueling Europe's Crisis". The New York Times. Retrieved 6 May 2010.
- ^ "Greece's sovereign-debt crunch: A very European crisis". 4 February 2010. Retrieved 2 May 2010.
{{cite news}}
: Text "The Economist" ignored (help) - ^ "Greek Deficit Revised to 13.6%; Moody's Cuts Rating (Update2) – Bloomberg.com". Retrieved 2 May 2010.
- ^ "Britain's deficit third worst in the world, table – Telegraph". The Daily Telegraph. London. 19 February 2010. Retrieved 2 May 2010.
- ^ "Greek Debt Concerns Dominate – Who Will Be Next? – Seeking Alpha". Retrieved 2 May 2010.
- ^ "Greek debt to reach 120.8 pct of GDP in '10 – draft". 5 November 2009. Retrieved 2 May 2010.
{{cite news}}
: Text "Reuters" ignored (help) - ^ "Greece's sovereign-debt crisis: Still in a spin". 15 April 2010. Retrieved 2 May 2010.
{{cite news}}
: Text "The Economist" ignored (help) - ^ "Greeks and the state: an uncomfortable couple". Associated Press. 3 May 2010.[dead link]
- ^ Andrew Willis (26 January 2010). "Greek bond auction provides some relief". Euobserver.com. Retrieved 15 April 2011.
- ^ "Strong demand for 10-year Greek bond". Retrieved 2 May 2010.
- ^ a b Ewing, Jack (27 April 2010). "Cuts to Debt Rating Stir Anxiety in Europe". The New York Times.
- ^ "BBC News – Greek credit status downgraded to 'junk'". 27 April 2010. Retrieved 2 May 2010.
- ^ "Markets hit by Greece junk rating". BBC News. 27 April 2010.
- ^ "Timeline: Greece's economic crisis". 3 March 2010. Retrieved 2 May 2010.
{{cite news}}
: Text "Reuters" ignored (help) - ^ "ECB: Long-term interest rates". Retrieved 2 May 2010.
- ^ Lauricella, Tom (22 April 2010). "Investors Desert Greek Bond Market – WSJ.com". The Wall Street Journal. Retrieved 5 May 2010.
- ^ "ECB suspends rating limits on Greek debt , News". Business Spectator. 22 October 2007. Retrieved 5 May 2010.
- ^ "UPDATE 3-ECB will accept even junk-rated Greek bonds". Reuters. 3 May 2010. Retrieved 5 May 2010.
- ^ "Trichet May Rewrite ECB Rule Book to Tame Greek Risk (Update2)". Bloomberg. 30 May 2005. Retrieved 5 May 2010.
- ^ "Greece 10 Year (GGGB10YR:IND) Index Performance". Bloomberg. Retrieved 14 May 2011.
- ^ Ingrid Melander (5 March 2010). "Greek parliament passes austerity bill". Reuters. Retrieved 6 May 2010.
- ^ "Greece seeks activation of €45 billion aid package". Irish Times. 23 April 2010. Retrieved 6 May 2010.
- ^ "IMF head Strauss-Kahn says fund will 'move expeditiously' on Greek bailout request". Today.
- ^ "Greek minister says IMF debt talks are 'going well'". BBC. 25 April 2010. Retrieved 6 May 2010.
- ^ Christos Ziotis and Natalie Weeks (20 April 2010). "Greek Bailout Talks Could Take Three Weeks; Bond Payment Looms". Bloomberg. Retrieved 6 May 2010.
- ^ Steven Erlanger (24 March 2010). "Europe Looks at the I.M.F. With Unease as Greece Struggles". The New York Times. Retrieved 6 May 2010.
- ^ Gabi Thesing and Flavia Krause-Jackson (3 May 2010). "Greece Gets $146 Billion Rescue in EU, IMF Package". Bloomberg. Retrieved 6 May 2010.
- ^ Kerin Hope (2 May 2010). "EU puts positive spin on Greek rescue". Financial Times. Retrieved 6 May 2010.
- ^ Christopher Rhoads (10 July 2010). "The Submarine Deals That Helped Sink Greece". The Wall Street Journal. Retrieved 27 June 2011.
- ^ Template:Gr icon"Fourth raft of new measures". In.gr. 2 May 2010. Retrieved 6 May 2010.
- ^ a b Friedman, Thomas L. (14 May 2010). "Greece's newest odyssey". San Diego, California: San Diego Union-Tribune. pp. B6.
- ^ Judy Dempsey (5 May 2010). "Three Reported Killed in Greek Protests". The New York Times. Retrieved 5 May 2010.
- ^ Global Economics Flash, Greek Sovereign Debt Restructuring Delayed but Not Avoided for Long, 5 May 2010, "The amount of fiscal tightening announced over the next three years is even larger than we expected: €30 bn worth of spending cuts and tax increases, around 12.5% of the 2009 Greek GDP, and an even higher percentage of the average annual GDP over the next three years (2010–2012). With 5 percentage points of GDP tightening in 2010 and 4 percentage points of GDP tightening in 2011, the economy should contract quite sharply – between 3 and 4 percent this year and probably another 1 or 2 percent contraction in 2011."
- ^ "'De-facto' Greek default 80% sure: Global Insight – MarketWatch". MarketWatch. 28 April 2010. Retrieved 2 May 2010.
- ^ "cnbc: countries probable to default". CNBC. 1 March 2010.
- ^ "Greece Turning Viral Sparks Search for EU Solutions (Update2) – Bloomberg.com". Bloomberg. 29 April 2010. Retrieved 2 May 2010.
- ^ "Roubini on Greece , Analysis & Opinion ,". Blogs.reuters.com. 27 April 2010. Retrieved 5 May 2010.
- ^ a b M. Nicolas J. Firzli, "Greece and the Roots the EU Debt Crisis" The Vienna Review, March 2010
- ^ Louise Armitstead, "EU accused of 'head in sand' attitude to Greek debt crisis" The Telegraph, 23 June 2011
- ^ Frierson, Burton (14 January 2010). "Fed's balance sheet liabilities hit record". Reuters.
- ^ "UPDATE: Greek, Spain, Portugal Debt Insurance Costs Fall Sharply – WSJ.com". The Wall Street Journal. 29 April 2010. Retrieved 2 May 2010. [dead link]
- ^ "BBC News – Q&A: Greece's economic woes". BBC. 30 April 2010. Retrieved 2 May 2010.
- ^ "Italy Not Among Most at Risk in Crisis, Moody's Says (Update1)". Bloomberg. 7 May 2010. Retrieved 10 May 2010.
- ^ "Zapatero denies talk of IMF rescue". Financial Times. 5 May 2010. Retrieved 15 April 2011.
- ^ "Finfacts Ireland Missing Page". Finfacts.ie. Retrieved 15 April 2011.
- ^ Murado, Miguel-Anxo (1 May 2010). "Repeat with us: Spain is not Greece". The Guardian. London.
- ^ "Daniel Gros: The Euro Can Survive a Greek Default – WSJ.com". The Wall Street Journal. * 29 APRIL 2010. Retrieved 2 May 2010.
{{cite news}}
: Check date values in:|date=
(help) - ^ "Greece announces new austerity measures". Xinhua. 010-03-03. Retrieved 2 May 2010.
{{cite web}}
: Check date values in:|date=
(help) - ^ "The PIIGS Problem: Maginot Line Economics". New Deal 2.0. 04/12/2010. Retrieved 2 May 2010.
{{cite web}}
: Check date values in:|date=
(help) - ^ Stiglitz, Joseph (25 January 2010). "A principled Europe would not leave Greece to bleed". The Guardian. London. Retrieved 12 May 2010.
- ^ "FT.com / Comment / Opinion – A euro exit is the only way out for Greece". Financial Times. 25 March 2010. Retrieved 2 May 2010.
- ^ Long-term interest rate "Long-term interest rate statistics for EU Member States". ECB. 12 July 2011. Retrieved 22 July 2011.
{{cite web}}
: Check|url=
value (help) - ^ "Euro area and EU27 government deficit at 6.0% and 6.4% of GDP respectively" (PDF). Eurostat. 26 April 2011. Retrieved 21 July 2011.
- ^ a b c Eurozone "Eurozone 'mess' is a risk to UK banks, Bank of England governor admits". Guardian. 24 June 2011. Retrieved 22 July 2011.
{{cite web}}
: Check|url=
value (help) - ^ "Deconstructing Europe: How A €20 Billion Liquidity Crisis Is Set To Become A €1.6 Trillion Funding Crisis". Zero Hedge. 9 February 2010.
- ^ Grice, Dylan (8 March 2010), Popular Delusions newsletter, Société Générale
- ^ Kamelia Angelova (5 February 2010). "Niall Ferguson: The Next Greece? It's The US!". Businessinsider.com. Retrieved 5 May 2010.
{{cite web}}
: Text "12" ignored (help); Text "4,044" ignored (help); Text "5 February 2010, 3:54 pm" ignored (help) - ^ "/ Reports – Sovereigns: Debt levels raise fears of further downgrades". Financial Times. 24 February 2010. Retrieved 5 May 2010.
- ^ "Dáil votes to nationalise Anglo Irish". RTÉ. 20 January 2009. Retrieved 21 January 2009.
- ^ "McAleese signs Anglo Irish Bank Bill". RTÉ. 21 January 2009. Retrieved 21 January 2009.
- ^ The Irish Times, 28 April 2010, p.18.
- ^ Irish Times, 19 May 2010, p.15.
- ^ http://www.economist.com/blogs/freeexchange/2010/09/irelands_economy_0
- ^ "Irish Times" timeline on financial events 2008-2010
- ^ http://www.rte.ie/news/2011/0418/rating-business.html
- ^ http://www.irishtimes.com/newspaper/finance/2011/0711/1224300497041.html
- ^ Template:Pt icon Grande investigação DN Conheça o verdadeiro peso do Estado, Diário de Notícias (7 January 2011)
- ^ Portugal’s Unnecessary Bailout – The New York Times
- ^ Portugal's 78bn euro bail-out is formally approved. BBC News, 16 May 2011.
- ^ Portugal Fin Min: Average Rate On EU/IMF Loan Is Around 5.1%, Wall Street Journal, 16 May 2011
- ^ [1]
- ^ "Portugal Government Ends Golden-Share Holdings". Wall Street Journal. 5 July 2011. Retrieved 20 July 2011.
- ^ "Portugal's credit rating slashed", Business Spectator, 6 July 2011
- ^ "Need for big cuts dawns on Spain", Financial Time, 12 May 2010, retrieved 12 May 2010
- ^ Obama calls for 'resolute' spending cuts in Spain, EUObserver, 12 May 2010, retrieved 12 May 2010
- ^ "Spain Lowers Public Wages After EU Seeks Deeper Cuts", Bloomberg Business Week, 12 May 2010, retrieved 12 May 2010
- ^ http://www.ft.com/intl/cms/s/0/d9671dd8-9e66-11e0-8e61-00144feabdc0.html#axzz1QE2LJCD7
- ^ http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=0&language=en&pcode=tsieb090
- ^ http://www.economist.com/blogs/dailychart/2011/05/europes_economies
- ^ "Iceland 2011 Recovery Pace to Lag Previous Estimate, IMF Says," by Omar R. Valdimarsson, Bloomberg, 14 January 2011
- ^ "Gud velsigne Island! ( Finanskrisen , Makro og politkk , Utenriks )". E24.no. 6 October 2008. Retrieved 8 July 2009.
- ^ Central Government Debt for Iceland in 2010, OECD StatExtracts, 25 June 2011.
- ^ a b "Iceland To Raise $1B In Bond Sale". Institutional Investor. 9 June 2011. Retrieved 17 June 2011.
- ^ a b Asgeir Jonsson (16 June 2011). "Iceland's Banks Come in From the Cold". Wall Street Journal. Retrieved 17 June 2011.
- ^ a b Maddox, David Europe in freefall – Belgium could be next to need help The Scotsman, 26 November 2010, Retrieved 27 November 2010
- ^ a b c Robinson, Francis Belgian Debt and Contagion The Wall Street Journal, 26 November 2010, Retrieved 27 November 2010
- ^ Belgium sees breakthrough as coalition talks open Euractiv, 21 July 2011, Retrieved 27 July 2011
- ^ "Belgium". US Department of State. April 2010. Retrieved 9 May 2010.
- ^ [2] "The European Financial Stability Facility (EFSF), a legal instrument agreed by finance ministers earlier this month following the risk of Greece's debt crisis spreading to other weak economies."
- ^ [3] "The 27 Member States agreed on 9 May 2010 that the Commission will be allowed to be tasked by the euro area Member States in the context of the assistance decided through a special purpose vehicle (the European Financial Stability Facility (EFSF)) up to EUR440 billion and aiming at preserving financial stability in Europe. For the purposes of this support, the euro area Member States entrust the Commission, where appropriate in liaison with the ECB, with the task of:
(i) negotiating and signing on their behalf after their approval the memoranda of understanding related to this support;
(ii) providing proposals to them on the loan facility agreements to be signed with the beneficiary Member State(s);
(iii) assessing the fulfilment of the conditionality laid down in the memoranda of understanding;
(iv) providing input, together with the EIB, to further discussions and decisions in the Eurogroup on EFSF related matters and, in a transitional phase, in which the EFSF is not yet fully operational, on building up its administrative and operational capacities.
In addition, the Commission may be entrusted with certain additional tasks relating to the implementation of the support in accordance with the framework agreement to be concluded between the EFSF and the euro area Member States. The Commission shall also ensure consistency between EFSF operations and other operations of assistance by the EU.
The role of the Commission will not imply an increase in the expenditure of the Commission or of any other item of expenditure under the EU budget.
The Commission and the ECB are invited to nominate an observer to the Board of Directors of the EFSF." - ^ [4] "8 June (Bloomberg) – European finance ministers put the finishing touches on a rescue fund being backed by 440 billion euros ($524 billion) in national guarantees, seeking to halt the spread of Greece’s debt crisis. The European Financial Stability Facility would sell bonds backed by the guarantees and use the money it raises to make loans to euro-area nations in need, the finance ministers agreed yesterday in Luxembourg. The new entity would sell debt only after an aid request is made by a country."
- ^ [5] "Media reports said that Spain would ask for support from two EU funds for eurozone governments in financial difficulty: a €60bn ‘European financial stabilisation mechanism', which is reliant on guarantees from the EU budget."
- ^ [6] "The EFSF is expected to start operations in a few weeks, as soon as national parliaments representing 90 per cent of the fund's shareholding have approved it. At that point, all eurozone governments will be obliged to issue guarantees for the EFSF's debt instruments. If a country should need emergency funds before then, it can turn to a €60bn balance of payments facility that is under the European Commission's authority and uses the EU budget as collateral. This, plus the availability of up to €250bn in International Monetary Fund loans, makes up the €750bn package."
- ^ "Shares and oil prices surge after EU loan deal". BBC. 10 May 2010. Retrieved 10 May 2010.
- ^ Nazareth, Rita. "Stocks, Commodities, Greek Bonds Rally on European Loan Package". Bloomberg. Retrieved 15 April 2011.
- ^ McDonald, Sarah. "Asian Bond Risk Tumbles Most in 18 Months on EU Loan Package". Bloomberg. Retrieved 15 April 2011.
- ^ "ECB decides on measures to address severe tensions in financial markets". ECB. 10 May 2010. Retrieved 21 May 2010.
- ^ "ECB: ECB decides on measures to address severe tensions in financial markets". Retrieved 10 May 2010.
- ^ Lanman, Scott (10 May 2010). "Fed Restarts Currency Swaps as EU Debt Crisis Flares". Bloomberg. Retrieved 15 April 2011.
- ^ Vits, Christian (10 May 2010). "Euro-Area Central Banks Are Buying Government Bonds". Bloomberg. Retrieved 15 April 2011.
- ^ "European Markets Surge". The Wall Street Journal. 10 May 2010. Retrieved 10 May 2010. [dead link]
- ^ Silberstein, Daniela. "European Shares Jump Most in 17 Months as EU Pledges Loan Fund". Bloomberg. Retrieved 15 April 2011.
- ^ Traynor, Ian (10 May 2010). "Euro strikes back with biggest gamble in its 11-year history". The Guardian. UK. Retrieved 10 May 2010.
- ^ Wearden, Graeme; Kollewe, Julia (17 May 2010). "Euro hits four-year low on fears debt crisis will spread". The Guardian. UK.
- ^ Chanjaroen, Chanyaporn. "Oil, Copper, Nickel Jump on European Bailout Plan; Gold Drops". Bloomberg. Retrieved 15 April 2011.
- ^ Jenkins, Keith (10 May 2010). "Dollar Libor Holds Near Nine-Month High After EU Aid". Bloomberg. Retrieved 15 April 2011.
- ^ Moses, Abigail (10 May 2010). "Default Swaps Tumble After EU Goes 'All In': Credit Markets". Bloomberg. Retrieved 15 April 2011.
- ^ Kearns, Jeff (10 May 2010). "VIX Plunges by Record 36% as Stocks Soar on European Loan Plan". Bloomberg. Retrieved 15 April 2011.
- ^ Donahue, Patrick (10 May 2010). "Rehn Says Deficit Cuts Absolutely Necessary in Spain, Portugal". Bloomberg. Retrieved 15 April 2011.
- ^ Willis, Bob (10 May 2010). "Roach Says Debt Crisis Raises Risk of 'Double Dip' Recession". Bloomberg. Retrieved 15 April 2011.
- ^ Childs, Mary. "Roubini Says European Resolution an 'Open Question': Tom Keene". Bloomberg. Retrieved 15 April 2011.
- ^ Kitano, Masayuki (21 May 2010). "Euro surges in short-covering rally, Aussie soars". Reuters. Retrieved 21 May 2010.[dead link]
- ^ "Moody's followed suit on Tuesday and became the third and final international ratings agency to cut the sovereign debt of Portugal, which, like Italy, Greece, and Spain, faces formidable economic and fiscal challenges". Ibtimes.com. 13 July 2010. Retrieved 2 January 2011.
- ^ http://theonlinesociety.com/2011/07/great-news-%E2%80%93-france-and-germany-to-help-pay-for-greek-army/
- ^ "The European Financial Stability Facility,". Retrieved 15 July 2010.
- ^ " – Elcano". Retrieved 2 May 2010.
- ^ Template:En iconsee Ionescu Romeo, "Romania and Greece: Together or Alone", AJBM Vol. 4(19), p. 4197, December, 2010 [Quoting Q1 2010 article (in French) by M. Nicolas J. Firzli in Revue Analyse Financière] (PDF), retrieved 29 March 2011
- ^ 'Merkel Economy Adviser Says Greece Bailout Should Bring Penalty', retrieved 15 February 2010
- ^ Kaletsky, Anatole (11 February 2010), "'Greek tragedy won't end in the euro's death'", The Times, London, retrieved 15 February 2010
- ^ "The euro's existential worries". The Economist. 6 May 2010. Retrieved 12 May 2010.
- ^ Grabel, Ilene (1 May 1998). "Foreign Policy in Focus , Portfolio Investment". Fpif.org. Retrieved 5 May 2010.
- ^ "P2P Foundation » Blog Archive » Defending Greece against failed neoliberal policies through the creation of sovereign debt for the productive economy". Blog.p2pfoundation.net. 6 February 2010. Retrieved 5 May 2010.
- ^ Pearlstein, Steven (21 May 2010). "Forget Greece: Europe's real problem is Germany". The Washington Post.
- ^ "CIA Factbook-Data". Cia.gov. Retrieved 15 April 2011.
- ^ "Ben Bernanke-U.S. Federal Reserve-The Global Savings Glut and U.S. Current Account Balance-March 2005". Federalreserve.gov. Retrieved 15 April 2011.
- ^ Krugman, Paul (2 March 2009). "Revenge of the Glut". The New York Times.
- ^ Krugman, Paul (7 September 1998). "Saving Asia: It's Time To Get Radical The IMF plan not only has failed to revive Asia's troubled economies but has worsened the situation. It's now time for some painful medicine". CNN.
- ^ 'Failure is not an option when it comes to Greece', retrieved 24 February 2010
- ^ "European cities hit by anti-austerity protests". BBC News. 29 September 2010.
- ^ Neuger, James G. (16 November 2010). "Ireland Weighs Aid as EU Spars Over Debt-Crisis Remedy". Bloomberg. Retrieved 15 April 2011.
- ^ "Council reaches agreement on measures to strengthen economic governance" (PDF). Retrieved 15 April 2011.
- ^ Jan Strupczewski (15 March 2011). "EU finmins adopt tougher rules against debt, imbalance". Uk.finance.yahoo.com. Retrieved 15 April 2011.
- ^ http://www.fxstreet.com/fundamental/analysis-reports/daily-global-commentary/2011/07/25/
- ^ http://epaper.timesofindia.com/Default/Client.asp?Daily=TOIPU&showST=true&login=default&pub=TOI&Enter=true&Skin=TOINEW&AW=1312466015166
- ^ Kashyap, Anil (10 June 2011). "Euro May Have to Coexist With a German-Led Uber Euro: Business Class". Bloomberg. Retrieved 11 June 2011.
- ^ Auerback, Marshall (25 May 2011). "To Save the Euro, Germany has to Quit the Euro Zone". Wall Street Pit. Retrieved 25 May 2011.
- ^ Demetriades, Panicos (19 May 2011). "It is Germany that should leave the eurozone". Financial Times. Retrieved 25 May 2011.
- ^ Rogers, Jim (26 September 2009). "The Largest Creditor Nations Are In Asia". Jim Rogers Blog. Retrieved 1 June 2011.
- ^ Mattich, Alen (10 June 2011). "Germany's Interest Rates Have Become a Special Case". The Wall Street Journal. Retrieved 17 June 2011.
- ^ Henkel, Hans-Olaf (13 March 2011). "Germany needs to resist the euro's sweet-smelling poison". The Guardian. Retrieved 14 June 2011.
- ^ Evans-Pritchard, Ambrose (17 July 2011). "A modest proposal for eurozone break-up". The Telegraph. Retrieved 18 July 2011.
- ^ "Can Greece survive?" by L. Randall Wray, New Economic Perspectives, 25 June 2011
- ^ Ricci, Luca A., "Exchange Rate Regimes and Location", 1997
- ^ "Economics is in crisis: it is time for a profound revamp" by Paul De Grauwe, professor of economics at the University of Leuven, published in the Financial Times, 21 July 2009, reproduced at the university website
- ^ [http://neweconomicperspectives.blogspot.com/2010/03/interview-with-randall-wray-about.html Greece's Debt Crisis, interview with L. Randall Wray, 13 March 2010
- ^ "I’ll buy the Acropolis" by Bill Mitchell, 29 May 2011
- ^ "To Save the Euro, Germany Must Quit the Euro Zone" by Marshall Auerback, 25 May 2011
- ^ "Greece not alone in exploiting EU accounting flaws". Reuters. 22 February 2010. Retrieved 20 August 2010.
- ^ "Greece is far from the EU's only joker". Newsweek. 19 February 2010. Retrieved 16 May 2011.
- ^ "The Euro PIIGS out". Librus Magazine. 22 October 2010. Retrieved 17 May 2011.
- ^ "'Creative accounting' masks EU budget deficit problems". Sunday Business. 26 June 2005. Retrieved 17 May 2011.
- ^ "Step Aside Greece: How Gustavo Piga Exposed Europe's Enron In 2001". Zerohedge. 28 February 2010. Retrieved 10 September 2010.
- ^ "UK Finances: A Not-So Hidden Debt". eGovMonitor. 12 April 2011. Retrieved 16 May 2011.
- ^ Butler, Eamonn (13 June 2010). "Hidden debt is the country's real monster". The Sunday Times. London. Retrieved 16 May 2011.
- ^ Newmark, Brooks (21 October 2008). "Britain's hidden debt". Guardian. London. Retrieved 16 May 2011.
- ^ "The Hidden Debt Bombshell" (PDF). Pointmaker. October 2009. Retrieved 16 May 2011.
- ^ Wheatcroft, Patience (16 February 2010). "Time to remove the mask from debt". Wall Street Journal. Retrieved 16 May 2011.
- ^ "Brown accused of 'Enron accounting'". BBC News. 28 November 2002. Retrieved 16 May 2011.
- ^ Littlejohn, Richard (11 January 2011). "Need a lesson in economics, Alan? Try starting with Mr Micawber". MailOnline. London. Retrieved 16 May 2011.
- ^ "IMF calls for bank guarantees to be included in the national debt". Gold made simple News. 6 April 2011. Retrieved 5 June 2011.
- ^ "'Hidden' debt raises Spain bond fears". Financial Times. 16 May 2011. Retrieved 16 May 2011.
- ^ "The Hidden American $100 Trillion Debt Problem". Viable Opposition. 4 April 2011. Retrieved 16 May 2011.
- ^ "Bill Gross says US is Out-Greeking the Greeks on Debt". Bloomberg. 30 March 2011. Retrieved 17 May 2011.
- ^ "Botox and beancounting Do official statistics cosmetically enhance America's economic appearance?". Economist. 28 April 2011. Retrieved 16 May 2011.
- ^ "Economist: United States Worse Off than Greece". Alex Jones’ Infowars.com. 28 January 2011. Retrieved 25 May 2011.
- ^ a b c "Credit-rating agencies under fire in Europe crisis – Yahoo! News". Retrieved 2 May 2010. [dead link]
- ^ a b Waterfield, Bruno (28 April 2010). "European Commission's angry warning to credit rating agencies as debt crisis deepens – Telegraph". The Daily Telegraph. London. Retrieved 2 May 2010.
- ^ Wachman, Richard (28 April 2010). "Greece debt crisis: the role of credit rating agencies". The Guardian. London. Retrieved 2 May 2010.
- ^ Lowenstein, Roger (27 April 2008). "Moody's – Credit Rating – Mortgages – Investments – Subprime Mortgages – New York Times". New York Times. Retrieved 2 May 2010.
- ^ "FT.com / US / Politics & Foreign policy – Moody's chief admits failure over crisis". Financial Times. Retrieved 2 May 2010.
- ^ "Iceland row puts rating agencies in firing line". Retrieved 2 May 2010.
{{cite web}}
: Text "Business" ignored (help) - ^ "BBC NEWS". BBC News. 28 January 2009. Retrieved 2 May 2010.
{{cite news}}
: Text "Business" ignored (help); Text "Ratings agencies admit mistakes" ignored (help) - ^ "Greek crisis: the world would be a better place without credit rating agencies – Telegraph Blogs". Daily Telegraph. UK. 28 April 2010. Retrieved 2 May 2010.
- ^ "Are the ratings agencies credit worthy?". CNN.
- ^ 11:17 am Today11:17 a.m. 5 May 2010 (5 March 2010). "ECB suspends rating threshold for Greece debt". MarketWatch. Retrieved 5 May 2010.
{{cite web}}
: CS1 maint: numeric names: authors list (link) - ^ "FT.com / Europe – Rethink on rating agencies urged". Financial Times. Retrieved 2 May 2010.
- ^ "EU Gets Tough on Credit-Rating Agencies". BusinessWeek. Retrieved 2 May 2010.
- ^ "European indecision: Why is Germany talking about a European Monetary Fund?". Retrieved 2 May 2010.
{{cite news}}
: Text "The Economist" ignored (help) - ^ Szigetvari, András (27 June 2011). "Mit der Brechstange gegen das Rating-Oligopol". Retrieved 27 June 2011.
{{cite news}}
: Text "DerStandard" ignored (help); soft hyphen character in|title=
at position 23 (help) - ^ "EUROPA – Press Releases – A turning point for the European financial sector". Europa.eu. 1 January 2011. Retrieved 24 April 2011.
- ^ "ESMA". Esma.europa.eu. 1 January 2011. Retrieved 24 April 2011.
- ^ "EU erklärt USA den Ratingkrieg". 23 June 2011. Retrieved 24 June 2011.
{{cite news}}
: Text "Finacial Times Deutschland" ignored (help) - ^ Matussek, Katrin (23 June 2011). "ESMA Chief Says Rating Companies Subject to EU Laws, FTD Reports". Retrieved 24 June 2011.
{{cite news}}
: Text "The Economist" ignored (help) - ^ Firzli and Bazi, M. Nicolas (2011). "Infrastructure Investments in an Age of Austerity : The Pension and Sovereign Funds Perspective". Revue Analyse Financière. 41 (Q4): 19–22. doi:http://www.turkishweekly.net/op-ed/2852/infrastructure-investments-in-an-age-of-austerity-the-pension-and-sovereign-funds-perspective.html.
{{cite journal}}
: Check|doi=
value (help); External link in
(help)|doi=
- ^ "euro zone rumours: There is no conspiracy to kill the euro". The Economist. Retrieved 2 May 2010.
{{cite news}}
: Text "The Economist" ignored (help) - ^ "Greek Debt Crisis Worsens". Retrieved 2 May 2010.
- ^ Barbara Kollmeyer (15 February 2010). "Spanish secret service said to probe market swings". MarketWatch. Retrieved 13 May 2010.
- ^ Gavin Hewitt (16 February 2010). "Conspiracy and the euro". BBC News. Retrieved 13 May 2010.
- ^ Larry Elliot (28 January 2009). "London School of Economics' Sir Howard Davies tells of need for painful correction". The Guardian. London. Retrieved 13 May 2010.
- ^ "Euro area balance of payments (December 2009 and preliminary overall results for 2009)". European Central Bank. 19 February 2010. Retrieved 13 May 2010.
- ^ "A Media Plot against Madrid?: Spanish Intelligence Reportedly Probing 'Attacks' on Economy". Der Spiegel. Retrieved 2 May 2010.
- ^ Roberts, Martin (14 February 2010). "Spanish intelligence probing debt attacks-report". Retrieved 2 May 2010.
{{cite news}}
: Text "Reuters" ignored (help) - ^ Cendrowicz, Leo (26 February 2010). "Conspiracists Blame Anglo-Saxons, Others for Euro Crisis". Time. Retrieved 2 May 2010.
- ^ Tremlett, Giles (14 February 2010). "Anglo-Saxon media out to sink us, says Spain". The Guardian. London. Retrieved 2 May 2010.
- ^ "Spain and the Anglo-Saxon press: Spain shoots the messenger". The Economist. Retrieved 2 May 2010.
- ^ "Spanish Intelligence Investigating "Anglo-Saxon" Media". The Washington Independent. Retrieved 2 May 2010.
- ^ "Spanish intelligence probe 'debt attacks' blamed for sabotaging country's economy". Daily Mail. UK. 15 February 2010. Retrieved 2 May 2010.
- ^ Larry Elliot (28 January 2010). "No EU bailout for Greece as Papandreou promises to "put our house in order"". The Guardian. London. Retrieved 13 May 2010.
- ^ Sean O'Grady (2 March 2010). "Soros hedge fund bets on demise of the euro". The Independent. London. Retrieved 11 May 2010.
- ^ Alex Stevenson (2 March 2010). "Soros and the bullion bubble". FT Alphaville. Retrieved 11 May 2010.
- ^ Donahue, Patrick (23 February 2010). "Merkel Slams Euro Speculation, Warns of 'Resentment'". BusinessWeek. Retrieved 11 May 2010.
- ^ "Kevin Connor: Goldman's Role in Greek Crisis Is Proving Too Ugly to Ignore". Huffington Post. USA. 27 February 2010. Retrieved 2 May 2010.
- ^ Andrew Clark, Heather Stewart, and Elena Moya (26 February 2010). "Goldman Sachs faces Fed inquiry over Greek crisis". The Guardian. London. Retrieved 11 May 2010.
{{cite news}}
: CS1 maint: multiple names: authors list (link) - ^ Wearden, Graeme (19 May 2010). "European debt crisis: Markets fall as Germany bans 'naked short-selling'". The Guardian. UK. Retrieved 27 May 2010.
External links
- Interactive Map of the Debt Crisis Economist Magazine, 9 February 2011
- Map of European Debts New York Times 20 December 2010
- Budget deficit from 2007 to 2015 Economist Intelligence Unit 30 March 2011
- Protests in Greece in Response to Severe Austerity Measures in EU, IMF Bailout – video report by Democracy Now!
- Diagram of Interlocking Debt Positions of European Countries New York Times 1 May 2010
- Argentina: Life After Default Sand and Colours 2 August 2010
- Google – public data: Government Debt in Europe
- Stefan Collignon: Democratic requirements for a European Economic Government Friedrich-Ebert-Stiftung, December 2010 (PDF 625 KB)
- Nick Malkoutzis: Greece - A Year in Crisis Friedrich-Ebert-Stiftung, Juni 2011
- Rainer Lenz: Crisis in the Eurozone Friedrich-Ebert-Stiftung, Juni 2011