Why Greek Exit From The Euro Would Be A Very Bad Idea

2/17/2015 @ 7:50PM

Frances Coppola

http://www.forbes.com/sites/francescoppola/2015/02/17/why-greek-exit-from-the-euro-would-be-a-very-bad-idea/

Ever since the election of the Syriza government, there has been growing talk of Greece leaving the Euro. Markets are jittery: fears of Greek default and exit are forcing up Greek bond yields, and the Greek stock market is on a roller-coaster ride, falling with every piece of news that suggests rising exit risk then bouncing back when exit doesn’t happen and everyone calms down. There is a silent run on Greek banks as depositors fearful of re-denomination losses remove their funds to safe havens.

And it’s easy to see where those funds are going. German claims on the Target2 settlement system are rising fast, leading uber-hawk Professor Hans Werner Sinn to demand capital controls be imposed to end capital flight from Greece. Exactly why he thinks capital controls are a good idea at this stage is not entirely clear: he seems to fear that the rest of the Eurozone will be forced to bail out the Greek central bank, which is providing liquidity through the ELA scheme to enable those funds to be moved without bankrupting Greek banks.

Europe Should Call Greece's Bluff

FEB 2, 2015 2:00 AM EST

By Guy Hands

Bloomberg

In November 2011, I hosted a dinner for senior German bankers that was dominated by heated debate over the continuing Greek financial crisis. They were adamant that Greece should not again be rescued by Germany and its European partners or the International Monetary Fund. I argued that a further bailout was the only option.

Euro Slumps to 9-Year Low Against Dollar on ECB Easing Expectations

Currency Hits Lowest Point Against Dollar Since Late 2005

By JAMES RAMAGE

Updated Jan. 13, 2015 4:42 p.m. ET

The Wall Street Journal

The euro slipped to a new nine-year low against the dollar on Tuesday as investors bet the European Central Bank would announce broad measures to lift the economy and consumer prices at its meeting next week.

Euro sinks to fresh nine-year low

 BBC

8 January 2015 Last updated at 15:52 GMT

The euro has hit a fresh nine-year low against the dollar, in part after a surprise decrease in German manufacturing.

German factory orders fell by 2.4% in November compared with the previous month, worse than expected.

The odds of Greece leaving the euro have never been higher

By Matt O'Brien December 29, 2014

The Washington Post

Beware Greeks bearing the same political crisis over and over again. Because eventually this will be how the euro crisis ends: not with a bailout, but a ballot.

It's a tale as old as Homer, or at least it seems that way. The Greek government, you see, has once again collapsed under the weight of the country's austerity program, and anti-bailout parties are leading the polls ahead of new elections. This time, not that it really matters, the ruling coalition led by the right-of-center party New Democracy fell apart after it couldn't get its presidential nominee, a largely ceremonial role, confirmed in three tries. What does matter, though, is whether New Democracy, which is still running a close second, can hold on to power in the snap elections scheduled for Jan. 25. If it can't, then the far-left party Syriza will get its chance to lead Greece in a high-stakes game of chicken with Germany.

Euro Seen as Shield by Lithuanian Banker Wary of Russia

By Milda Seputyte  Dec 23, 2014 12:08 PM GMT+0200

 Bloomberg

On the eve of Lithuania’s euro adoption, the Baltic country’s top banker says Russia’s actions in Ukraine have pushed him into forbidden territory.

“The euro is an instrument for our deeper integration: the closer we are to the West, the further we are from the east,” Vitas Vasiliauskas said in an interview in Vilnius, the capital. “As a central bank governor, I shouldn’t get myself involved in geopolitical discussions. But these are the facts today.”

Euro shaky on ECB and Greece, dollar keeps edge

BY IAN CHUA AND HIDEYUKI SANO

SYDNEY/TOKYO Sun Dec 21, 2014 9:24pm EST

(Reuters) - The euro probed fresh two-year lows early on Monday in a subdued start to a holiday-shortened week, extending a multi-month trend of weakness against the dollar that many traders say will remain intact in the new year.

Speculation is high that the European Central Bank (ECB) will be forced to expand its asset-buying program to include sovereign debt in early 2015, at a time when the Federal Reserve is preparing to do the opposite and lift interest rates.

Greece and the euro

Crisis revisited

The Economist

http://www.economist.com/news/leaders/21636036-euro-still-vulnerable-and-greece-not-only-problem-crisis-revisited

The euro is still vulnerable, and Greece is not the only problem

Dec 13th 2014

IT WAS almost exactly five years ago that the euro crisis erupted, starting in Greece. Investors who had complacently let all euro-zone countries borrow at uniformly low levels abruptly woke up to the riskiness of an incompetent government borrowing money in a currency which it could not depreciate. There is thus a dismal symmetry in seeing the euro crisis flare up again in the place where it began.

The euro is heading for disaster - what luck for David Cameron!

The final unwinding of the disastrous single currency could give Britain everything it wants from Europe

By Peter Oborne

6:00AM GMT 10 Dec 2014

As Karl Marx was one of the earliest to point out, economics (though so much less interesting) is far more important than politics.

Marx considered all political events as epiphenomena. He viewed great men as blind instruments of irresistible forces which they themselves could hardly comprehend.

The Marxist vision of society has been disproved many times, always at epic human cost. However, his doctrine that productive forces propel history has stood the test of time – and is invaluable for an understanding of the current predicament of the European Union

Euro sells off after report ECB considering corporate bond buys

BY DANIEL BASES

NEW YORK Tue Oct 21, 2014 4:50pm EDT

(Reuters) - The euro fell sharply against the dollar on Tuesday after Reuters reported the European Central Bank was looking at buying corporate bonds as soon as December in its efforts to revive the stagnating euro zone economy.

The move, if realized, would expand the private-sector asset-buying program the ECB began on Monday, which is aimed at fostering lending to businesses in hopes of spurring growth.

Dollar drops to two week-low vs euro ahead of Fed outcome

BY GERTRUDE CHAVEZ-DREYFUSS

NEW YORK Tue Sep 16, 2014 3:49pm EDT

…"If Scotland becomes separate from the UK, it will most likely become a member of the EU. When it does, it will realise it cannot be 'independent, ever, because many aspects of life (political and economic) will be dictated by Brussels," said SLJ's Jen…

Soros Says Europe Faces 25 Years of Stagnation Without Overhaul

By Jesse Westbrook  Mar 12, 2014 12:45 PM GMT+0200

Bloomberg

Billionaire investor George Soros said Europe faces 25 years of Japanese-style stagnation unless politicians pursue further integration of the currency bloc and change policies that have discouraged banks from lending.

While the immediate financial crisis that has plagued Europe since 2010 “is over,” it still faces a political crisis that has divided the region between creditor and debtor nations, Soros, 83, said in a Bloomberg Television interview in London today. At the same time, banks have been encouraged to pass stress tests, rather than boost the economy by providing capital to businesses, he said.

It's The Euro, Stupid

Frances Coppola, Contributor

I write about banking, finance and economics.

FORBES

A few days ago the German constitutional court referred the question of the legality of the ECB’s Outright Monetary Transactions (OMT) to the European Court of Justice (ECJ), claiming that the ECB was straying into fiscal policy that was beyond its mandate and that OMT breached EU treaty directives outlawing monetary financing of governments.

Eurozone watchdog says some banks should go under: FT

FRANKFURT/LINKOPING, Sweden Mon Feb 10, 2014 2:04pm EST

(Reuters) - Some of the euro zone's lenders have no future and should be allowed to go under if they fail a health check, the bloc's new banking supervisor told the Financial Times, underscoring a tougher approach to banking oversight.

Daniele Nouy told the newspaper that if any of the region's participating banks fail the European Central Bank's comprehensive assessment then they could be wound down, and that merging them in order to save them was not an option.

No end in sight to 'pain' of betting on weaker euro

BY ANIRBAN NAG

LONDON Tue Feb 4, 2014 11:13am EST

(Reuters) - Anyone betting against the euro may well find this strategy remains a "pain trade", even though the common currency has fallen to a 10-week low against the dollar this week.

This drop looks unlikely to be the long-awaited breakout in what has been one of the world's most stable free exchange rates and, in a remarkable change of fortunes, the euro zone is showing signs of becoming a safe haven.

Euro May Be Resurfacing as a Safe Haven

Currency Is Bucking Old Trend of Wilting Amid Headwinds

By TOMMY STUBBINGTON

Updated Feb. 3, 2014 3:11 p.m. ET

LONDON—Over the past few years, the euro has been a barometer of risk: When the markets got cloudy, it fell. But in recent weeks, that relationship has changed, leading some analysts to wonder whether Europe, after years of crisis, is becoming a haven again.

When emerging markets took a steep fall in the past few weeks, dragging global assets with them, the euro shrugged it off. On some days, the currency has even managed to rally while stocks are crashing—a tendency usually associated with the Japanese yen or the U.S. dollar.

The euro’s hellhound

Charlemagne

The Economist

It is time to reform the troika that handles euro zone bail-outs

Feb 1st 2014 | From the print edition

IN GREEK mythology, Cerberus is the three-headed dog guarding the gates to Hades. In modern Greek politics, the troika is the three-headed monster that traps the country in an economic underworld. At the finance ministry in Athens, even the cleaning ladies shout “murderers” at visiting members of the troika. In Lisbon protest banners declare “Fuck the troika”. There is now a popular Portuguese neologism, entroikado, roughly meaning “economically screwed”.

Carney Says Scotland Can Learn From Euro Crisis in Pound Debate

By Emma Charlton and Jennifer Ryan  Jan 29, 2014 3:15 PM GMT+020

Bloomberg

Scotland will probably need to mirror the euro-region’s integration plans and surrender some sovereignty if the nation votes to separate from the rest of the U.K., Bank of England Governor Mark Carney said.

While First Minister Alex Salmond wants to keep the pound if Scots vote for independence at a Sept. 18 referendum, Carney said policy makers need to “consider carefully” the financial stability risks associated with such a monetary union. Speaking after a meeting today with Salmond in Edinburgh, he said independence will involve “some ceding” of sovereignty.

Draghi Sees Progress in Euro Zone, but Puts Banks on Notice

By JACK EWING

The New York Times

DAVOS, SWITZERLAND — Some banks in the euro zone could go out of business as a result of intense official scrutiny they will face this year, Mario Draghi, the president of the European Central Bank, said Friday as he presented a generally upbeat view of the European economy that was, however, laced with warnings.

Deflation is deflation even if you deserve it

BY JAMES SAFT

Thu Jan 9, 2014 5:06pm EST

(Reuters) - Here is some unwelcome news for the likes of Greece, Ireland and Cyprus: Apparently it isn't really deflation if you deserve it.

That's the takeaway from remarks by ECB chief Mario Draghi, who despite persistently falling prices in some euro zone peripheral economies, was at pains on Thursday to define the problem away.