

The euro crisis

Game change?


See article

Readers' comments



True to form, and your form sets a standard high, "Game Change?" is clearly stated and comprehensive. When well crafted, short, declarative sentences can have the greatest impact. "Sadly," the seven-word sentence may well prove accurate.



Thank you TE mods for allowing to reposting two exchanges i had made with
Emma Finney and the posts had been removed before.
No 1 post
Hell Emma yes i no i noticed that about him,All gone very quiet on the blog
No 2 post
Oh dont worry am sure we can make her come to life i think cant we LOL


There's a lot of Americans trolling the comments section on this article. Envious are we that the nearest you have to a fiscal plan is lolRomney?

Face it. The EU is here to stay. We will grow stronger and this will be a blip on our radar - it's mostly North America's fault this all happened anyway.

Only a matter of time before Europe is one great USE, and then we will see who was right all along.

Oshin1 in reply to Mikeylano

Really so Greece lying about its GND and going into swaps with GS and not telling ECB and or the ECB checking the greek CBs books to joining the EURO,What about Greek, Ireland's and Portugal bail outs and soon to come Spain oh yes all is well in the EZ and EU isn't is NOT,

cs r

"They will need to explain the grand strategy to voters, who ought to be consulted on such a big change."

Citizens should passively "be consulted" rather than actively decide.

A new form of government settles on Europe. Consultive nannarchy. Periodically the voters may replace their political elite, but there will be nanny.


Sure a lot could go wrong. One more round of "QE" announced by helicopterwalla is a sure sign that the US is going deeper and deeper into the cesspool, while TE keeps barking up the wrong tree.

Ismael X

Crystal clear conclusion: "they will need to explain the grand strategy to voters, who ought to be consulted on such a big change". That's what I'm screaming around and begging for in all internet sites where I post. Since Maastricht 1992, no Bruxelles big brass nor any national leader has taken the risk to directly ask european citizens a straight yes or nay on the whole Euro project. Now, anyone, really anyone, knows what it takes to make that project sustainable in the long run but still, BBBs, Bruxelles Big Brasses, and national bosses are trying to sneak the whole stuff through in small doses, whispered half words, ushered slow and twisted routes just in case the european citizens become too aware of the whole game going on. If Northern Folks really make numbers on the real huge load of billions this is going to cost them or Southern Folks really wake up to realize the real tears and blood they have to pay to turn into serious, modern and competitive countries (I'm italian, know what I'm saying) God knows how they might react! But... hey men and women up there... that's democracy! All else, i.e. the secretive way all these BBBs and alike are using, is a dangerous path towards something that looks like an authoritarian regime. I want a New Federal Europe Plan NOW and I want it pushed in referendum asap in the whole Euro area. WE are the ones who must decide. All politicians who skip that, are just half-Putins for me. Give me a poll and I'll fell down the all of them with my vote.


Seeing excellent calibre posters joining this thread, I feel tempted to repeat old thoughts in new clothes.

Just to make sure I'm not misunderstood, I repeat I am a moderate supporter of the Euro, I have always thought it to have been introduced a tad too early, a bit too hastily. Apart a couple of subtle technicalities I haven't changed much my position since say 1992.

Most of the excellent posters I refer to above, hold different views from mine. Thank God! Without differing opinions we would still be trhowning stones at dinosaurs. Not scientifically correct but what would life be like if we couldn't take a few poetic liberties?

I have always been bemused and amused by the passion Euro decriers, and some supporters too, have put in their arguments.

The Euro is just a currency, for Pete's sake.

Currencies are just tools. Like a hammer they can be heavy headed or have a short handle but who gets passionate about it ever?

Somehow, in the last twenty years or so currencies have gained a sort of symbol of faith. It's always dangerous to give too much importance of faith symbols: look at the religious wars in the 1500's and the contemporary ones just coming (hope I'm wrong).

The truth is that currencies have always been very short lived. Sometimes we keep their names and symbols, particularly since paper money was invented, but a currency “really” seldom lasts longer than a couple of generations.

Take those used in tradition seeped cultures that dislike changing names as is common in English speaking civilizations. The US dollar hasn't changed name for 200 plus years. But not even der Perfesser whose knowledge is much deeper than mine will persuade me it is the same currency that it was before Nixon pulled the golden rug from under it in 75.

Well, I won't mention other dollars, mainly those from down under, that even in name, are younger than I am.

What about another paradigm of stability, the Swiss franc? To be honest it was created after the demise of the Latin Monetary Union, a couple of years after I was born...

Or the many northern Crowns? The oldest, poor thing, was made legal after Sweden threw a tantrum because Norway became independent and did not choose the prince Swedes liked.

1905 it was, dearie.

I don't even mention Sterling. At the beginning of my career, and for quite a long time, I was paid in Guineas and my wife never took kindly to the pound not being divided in shillings and pence.

Some will mention that currencies are bound by optimal currency areas laws.

Well, do get real: optimal currency areas are as material as blue unicorns or ideal gases.

Ideal gases were invented to help us think rationally assuming they behave in accordance with a maths law that's comically the same as the Irving Fisher/ Keynes constructs. In the physical world none of them exists although blue unicorns are said to have been sighted.

Doubts ?

In the good old days of the DM, Stuttgart needed the currency be 20% lower to sell Mercedes than Bonn, all of 200 miles apart would need to pay all Bundesrepublik Beamter; Spartanburg,NC 20 miles away, still prefers the dollar to be also 20% lower than in Charlotte, NC, Bank of America's HQ and make no bones that all hotels, restaurants, high end shops in the London West End would much rather have the Pound 20% lower than in Threadneedle Street, 3 miles away as the crow flies.

Come on! Despite the commending enthusiasm of der Perfesser, economics is a far more backward science than engineering. It took engineers a century to discover that there weren't two schools of steam turbines: action and reaction. We now know action is for high pressure, reaction for low pressure.

One day this will happen to economics: no more keynesianism, austrianism, monetarinism (silly words on purpose).

Just knowledge. As in turbines, we may have to find out first that the ideal gas equation wasn't very real; we needed complicated numerical integrations for the simple reason nobody knows how to integrate higher degree differential equations. The same for clever but, honestly, stone age Fisher/Keynes equations.

So, please do not attack, nor defend, any currency question with feelings. Just very, very cool reasoning we unfortunately are far, far, far from dominating at this stage.

A final sobering thought; whether good or bad, to unwind the Euro now without causing a catastrophe in forex markets with serious repercussions everywhere, mostly London and Singapore, would take close to a decade. (Remember the silly LMU).

Probably twice as long given the fact that several Economist surveys always showed some 2/3rds preferred the currency without debt mutualization.

By then, in a fast changing world, we shall have far different and more important worries.

Like rebuilding a reasonably prosperous world with far less organized crime than now.

In financial markets as elsewhere.

enlisted in reply to sanmartinian


Slightly off topic.

Zerohedge have a little summary on their homepage where they sum up the most recent events http://www.zerohedge.com/news/world-verge-war

For years you have warned now that something like this could happen. And not only in the debt crisis you were right on the money so to speak.

You were the first one to point out parallels to the 30s with great clarity, long before I read it anywhere else and it has become a mainstream expression by now. The same goes for the assessment of the "arab spring".

Living in Mitteleuropa I don't feel like a crisis is imminent and lately my only worry has been sanmartinian being so worried.

Of course as always we "hope you're wrong" but if not, I hope our politicians don't get involved in anything stupid. Maybe Europe (the UK, I know I know...) could be an Island of relative calm this time.

Well, but anyway, respect for the wisdom and insights...

enlisted in reply to sanmartinian


"Somehow, in the last twenty years or so currencies have gained a sort of symbol of faith."

Which is especially true for the DM. To some extent a symbol of national identification like the German national football team and the Verfassungsgericht.

But I wouldn't brush that asside as something sentimental or irrational.

We have to have faith in our money to make it work. It's paper after all.

The trust is dependent on the reputation of institutions like the ECB.
Institutions earn a reputation over time and if the ECB passes the first real test of her independence remains to be seen.

sanmartinian in reply to enlisted

to enlisted on the repetition of the 30's

Thank you for remembering my fears.

Like you I hope to be very wrong but recent events just seem intent to destroy those hopes.

Tylor Durden of zerohedge can be a bit scaremongering but he could be right.

I repeat an historical parallel that few people pay attention to. For some silly reason I am nor aware of (being probably the oldest nation-sate in existence may be the cause), Portugal has an historical knack for anticipating serious crises by a couple of years.

For the last few years, despite serious adverse circumstances, Portugal has kept very quiet and calm as it is her usual.

Suddenly some ten days ago, things suddenly changed. It is probably nothing; it may be just blowing off steam. After all, everybody is still very composed and tolerant.

But if it blows up without warning, be aware.

The very serious Europe-wide bloody 1848 revolution, just to give one of several examples, had its first upheaval in Portugal in 1846.

That leads me to another thought. The world crisis that started in October 1929 caused WW2 by the end of which, in 1945, the world had suffered a huge tragedy.

Statistically and by observation (I was a very interested teenager at the time) only three countries were better off in 1946 than in 1929. Sweden, Switzerland and Portugal.

Switzerland was almost strictly neutral but armed to the teeth, just in case.

Sweden tried to look very neutral but kept at bay the two sides bribing one with strategic supplies and blackmailing the other side with veiled hints she may join their opponents.

Portugal used her centuries' old strategy: not neutral, she treated putative enemies as friends, allies as always trusted eventual saviours.

Perhaps Europe, the united one, that is, could do worse than paying attention to these three examples.

Ireland an Spain were also officially neutral during WW2 but neither did half as good as the other three.

Maybe I'm wrong but Spain, split in two, had one half backing the losers, the other half backing the victors in her own preceding Civil War. Unfortunately, the half that was backed by the victors lost the Civil War.

Ireland was not so clear cut but the half that supported WW2 losers and the half that supported the victors, never really were trusted by either belligerent.

Maybe Europe, the united bit, in the almost inevitable conflict we seem to be heading to, will learn these lessons and keep away from it all.

Most of all by not making much noise of any type.

sanmartinian in reply to enlisted

to enlisted on the prestige of the DM

It's really funny to see how different age groups, and differently located people, see events.

After the, say, 70's, the DM was highly respected almost everywhere.

From the 50's to 1974, Swiss and Portuguese citizens, with the two hardest currencies in the world, never thought much of the DM.

After all, Heavens above!, Germany had an average inflation over 2%. The horror!

In Switzerland and Portugal inflation was below 1% for donkey's years (almost 50!!) and gold reserves increased in such way they seemed they would sink Jo'burg into its exhausted gold mines...

How times change perceptions!

The first oil shock in the early 70's put paid to all that.

That's why gentlemen never boast of their financial status. It can always change in a jiffy.

I would strongly recommend this attitude to newcomers to apparent financial good health such as a couple of not big Euro nations that seem to be heading to smooth downturns. Happily for us all, they look very harmless, and so we all hope they will be.

Spendthrift Italy never complained much of outside badmouthing for the past few years. She never boasted about having, by far, Europe's highest gold reserves per unit of foreign debt, either.

It takes non Italians like me to speak about it.

Needless to say, if a really serious crisis happens, gold reserves will come in a lot handier than mobile phones or tulips.

Whatever new money types like rating agencies owners may eventually say.

By the way, Germany does quite well in gold reserves too. It's fourth in the world ranking. Worry about those with a half of Germany's good ratio but I will not name them to avoid being called Borduriaphobe and even worse...)

And History shows parvenus to new money tend to fall quicker in the hands of organized financial crime than old experienced blood.


This sounds like the begining of another type of crisis, weak Economic fundamentals leading to high debt.

Financial solutions are only part of the solutions. Fundamentals in the Economy may need to improve for Economic growth.


Banking union signifies nothing. The solution is the political union. We need a single government for all countries of the euro-zone. With a sole government the markets would come against a brick wall and return empty-handed. The USE woiuld be a bitter pill for them.

Dominique II in reply to longman333


And the USE just happens to be roundly trashed by all boffins, loudmouths and thinkers of note, now what a surprise.

Dominique II in reply to longman333

"With a sole government the markets would come against a brick wall and return empty-handed. The USE would be a bitter pill for them."

And the USE just happens to be roundly trashed by all boffins, self-appointed tribunes and thinkers of note, now what a surprise.

Oshin1 in reply to Dominique II

Well if a banking union was like anything EZ and EU is run and lets not for get how not able to balance the EU books is it then it would just be another calamity waiting to happen would it

Dominique II in reply to Oshin1

"lets not for get how not able to"


As for the way the EU and EZ are run, it has lots of room for improvement, and historicall and recently such improvements have been forced upon us by crises. Makes for adrenalin. Why not? As long as it works, which up to now, it has.

All those enemies of the EU braying for its demise are in for a big disappointment. But it's useful to know they exist.

Oshin1 in reply to Dominique II

OH its demise can still happen and lets be honest,So please as i no you are such a euro fantic and french and let be honest france is such a economics walking disaster isn't it and why do things exist through all various institution's that the EU and EZ come up with like many remember greece and sarko begging merkel to bail out the first 1st time around round.


You say that ".......in the end, the euro’s survival rests on the political support for greater economic and financial union". I agrre but I think that the real euro's survival can rest only on the political union of the 17 countries of the euro-zone...the United States of Europe. There is no alternative. Either....or.



Part of the plan for a "banking union" is to have a Europe-wide scheme to protect client deposits.

In clear words that means that German savings should insure savings in other countries. So money in a German bank account is as "safe" as in a Greek bank account.

This is another assault on German interests in typical "mutualisation-socialisation" EU-fashion.

We all know that this aims to erase the incentive to transfer money from the periphery to Germany and protect banks in missmanaged countries. It is unacceptable nevertheless.

As always the EU-solution for EU-caused problems is to get their hands on German money. Predictable.

Rivierarocket in reply to enlisted

You cannot ask Germans to guarantee deposits of savings in the PIIGS countries (with their unbridled spending and manana attitude) unless you eliminate nation states and unify the entire system making a United States of Europe with free movement of even non citizens who are legal immigrants. We are nowhere near this point in Europe. I agree totally with your viewpoint.

The bank rescue fund is maintained from contributions from the banks based on their deposits. So all depositors pay into it through the interest margin. German savings would insure savings in other countries only if they would be decreased when other banks fail which is not the case. In the first round, you may be right to an extent: all depositors will have to pay into the fund. But as most banks in Eastern and Southern Europe are already under control of big multinational banks, the risks and losses are not country-specific. I think you project the problems of states onto the banks which in today's open markets is by far not justified. By the way, that's why Germany goes for more fiscal integration and rightly so.

Der Perfesser


This is Germany buying the bonds, despite the fig leaf of the ESM and the ECB. Will Germany enforce "conditionality"?

All the EU countries, including France (it is really as bust as the rest), want to have their cake and eat it too, to use and Anglo-Saxon phrase. They want to spend, sell their bonds, but not be ruled from Brussels and Berlin.

This IS a turning point in the EU, but only if now the Germans are tough and enforce good economic management of each country. Then the EU as a whole will get better. If not, there will be no change, except an even more monstrous debt which will drag Germany down.

But if the other EU countries continue to refuse to follow the "dictates" of the ECB/EU, can the German politicians enforce their will? My guess is no. That single person Angela Merkel is at the core of the EU's problems, and she is both weak and self serving. As part of this necessary reform the Germans have to get rid of her, and her friends, before it is too late. Then put good economists in control of the ECB, and enforce its requirements without hesitation.

enlisted in reply to Der Perfesser

Der Perfesser

"Angela Merkel is at the core of the EU's problems, and she is both weak and self serving."

I fear you are right. Mrs. Merkel has many strengths like rarely (never?) making the same mistake twice. But over the last years we read a lot about how powerful and strong she is and I think this is overstated.

That the CDU follows her like sheep is no wonder, it's the opportunistic content- and agenda-less nature of its cadres. It has been the same under Kohl and before.

But I was astonished to see the weakness when Mr. Wulff had to resign. She had no plan and was then easily forced and humiliated to accept Mr. Gauck as president against her will. And there were more such incidents.

Also in Europe Mrs. Merkel is not powerful because she is such a strong leader, but solely because she is the Chancellor of Germany. That's a difference.

Mrs. Merkel has managed the debt crisis relatively well until now and I have no intention to badmouth that/her, but as you say, after the elections next year she could turn into a EU-federalist to have a legacy (until now she has none) and do real damage to the interests of Germany. The first signs are already on the horizon.

Der Perfesser in reply to enlisted

I disagree with the first sentence of your last paragraph. She has not handled the crisis well at all. The theme of her actions from right at the start of the crisis was to serve the banks only. She tried to save the banks' loans in Greece, when the Greeks should have been allowed to default. If you go through the entire list of actions since then, they have not been in the interest of these impoverished nations such as Spain, or the EU, or even Germany, but only the banks. At the moment she (the ECB does what she says) is printing money to buy the banks' dud bonds, and as a concession to inflation fears, she is replacing these bonds by ECB/EU bonds.

If you ask any economist, most would tell you that not only has she taken consistently wrong actions, but her actions have made things much worse. What is she doing? Salting a few million Euros in a Swiss bank account?

emmafinney in reply to enlisted

However the German government is hopless when it comes to public relations.

Needlessly humiliating Greece and other southern European countries with scoldings and vague threats - cutting of aid if conditions are not met etc.

Anti-German sentiments in southern European countries has now became a fact of life.

enlisted in reply to Der Perfesser

Der Perfesser

"The theme of her actions from right at the start of the crisis was to serve the banks only."

Germany was pushing for haircuts in Greece quite early but the French didn't want that for their banks. They were much more involved there and needed time to get out.

I doubt that many economists would agree with your opinion that banks all over Europe should simply have allowed to go bankrupt.

Also, there was no alternative to shrinking some peripheral economies to realistic levels. Further financing their bubbles and inflated deficit economies would have been ruinous.

And if you compare Merkel to the alternatives like Schäuble, Steinbrück, Steinmeier she did a good job handling the Euro crisis. And I think she listens a lot to advisors which in itself is a very good quality.

So I still think in this field Mrs. Merkel did a relatively good job.

emmafinney in reply to enlisted

"Yes, terrible. I appreciate your concern."

And this from the person who comes from a country which is the most anti-American in Europe.

What goes around, comes around. There seems to be a God after all.

TPaine355 in reply to enlisted


oh yes the Edward L. Bernays's doctrine is still effective in Germany

first- German banks had more Greek bublic debt than the French's

"The BIS has released its Quarterly Review — and with it those infamous foreign claims numbers.

According to the new figures, a preliminary release of which went out in April, French banks have $56.7bn of lending exposure to Greece while German banks have about $40bn. But look closer, because the BIS figures have something new — a breakdown of credit exposure by type. On that basis, German banks are the most exposed to Greek government debt with $22.7bn held. French banks have $15bn."


second- they got their bailing out through ECB


Germans never want to acknowledge that they are responsible of the mess, it's always the others, and why not these bloody french, that already are the usual supects for the Anglo-sphere

You are falsh virtuous !

simple ex-pat

Sorry - no. The euro problem is about economic competitiveness within each countries real economy relative to Germany - until this issue is addressed (by leaving the euro) these crisies will continue ad nausium. This requires seven countries to leave - the five on bailouts, plus Italy and FRANCE - where competitiveness has declined 25% since the start of the euro - their real economy is slowly dying hence a mounting debt problem. If countries don't leave they face decades of ever tighter austerity - but at least Mercedes, B.M.W.'s and volkeswagons will be cheap - the real driver behind 'keeping everyone in the Euro'.

Courtjester in reply to simple ex-pat

Voice of reason - thank you.
And the deflationary pressure will never go away, because you do not grow out of inflation.... price readjustment is too slow
When will EU politicans understand, and act?
Actually, it would be easier - for the core to leave - there are fewer high competetive countries in the EU than not....

dunnhaupt in reply to simple ex-pat

That is correct. In fact it is not a crisis at all, i.e. a catastrophic event that would pass eventually. It is a built-in permanent structural flaw of the "one-size-fits-all" Euro that was forced on widely disparate economies.

D. Sherman

Please pardon me if I'm missing something simple here, but all that seems to be new about the new European Central Bank is that it will print unlimited money as needed to buy the bonds of member countries that have unsustainable amounts of debt, provided that those countries abide by an ECB-prescribed austerity plan. The obvious question is "What if they don't abide by the plan?" The goal of this new effort is to save the Euro, so by definition, the bank really cannot cut any member country off.

That being the case, this seems to be a commitment to hold the Euro together at all costs even if the North ends up assuming and paying off the South's debts. Anything short of that means the Euro falls apart. After all, why would I work hard to pay my bills if a rich uncle suddenly appeared and told me that I really ought to work hard to pay my bills but if I have trouble, he'll lend me as much money as I need for as long as I need it?

enlisted in reply to D. Sherman

D. Sherman

"What if they don't abide by the plan?"

Once the ECB is loaded with Spanish/Italian debt, the ECB is at the mercy of these states/politicians, not vice versa. So the incentive the abide by the plan is small for politicians from these countries.

We have to trust Italian and Spanish politicians to do the right thing.
...and who wouldn't trust these people?

TPaine355 in reply to enlisted


that will make a change since its origin ECB was serving the German politicians


The euro crisis. Game change? A thing is not necessarily true because men have done things. Remember remember the twelfth of September, ominously a day after the eleventh of September when Prof. Voßkuhle , Signore Draghi, Senhor Barroso all “danced to a fiddle” in addition, the Dutch voted for Fr Merkel. A seemingly uncoordinated action where the German Constitutional Court said yes, but.. to the ESM, , Signore Draghi said the ECB will buy the “kitchen sink”, Senhor Barroso proposing laws that banks can’t buy the “kitchen sink” and all Dutch politicians stating “no more money for Greece”. The Great Cockup is not only a fell in the northern region of the English Lake District.


The big problem in the euro zone is debt as many countries are going down the path of insolvency. The solution is not a "banking union" but a full fiscal union where all member states accept a limitation of their sovereignty with respect to government spending. This a necessary condition for the viability of euro bonds. What are the odds of that happening? Very long I'd say.

Frequent Travis in reply to flymulla

agreed on this one, a sensible comment than the one posted on Sep. 13th. 23:16.

A healthy EURO Zone needs a fiscal union. After 4 years of crisis, most Euro countries (even the Greek)do NOT want to get out this club because of the perks. Then, we all have to accept tighten fiscal measurements.

Regarding your post on Sep. 13th. 23:16: it is my humble opinion that the co-existence of different cultures and heritage in Europe has less to do fiscal union. On the contrary, a sound regional and local economy may only better promote the regional cultural development.


The poor European economy is being blamed for what many are calling "economic suicides." Since the recession began there in 2008, more people have committed suicide citing financial reasons,. "People are more and more uncertain about their future, which is leading to a sharp rise in mental health problems," Maria Nyman, director of Brussels-based Mental Health Europe, A study published in the journal Lancet points out the rise in suicides can especially be seen in the hardest hit economic countries. The Greek Ministry for Health reports in a single year the suicide rate increased from 2.8 suicides to at least five for every 100,000 people. According to World Health Organization's mental health program manager Matt Muijen, the increase in mental health problems is also affecting people's physical health. That in turn, he explained, is negatively impacting European economies. "The recovery of the European economies is dependent on the mental health of the population," Muijen warned.
. I thank you Firozali A.Mulla DBA


I absolutely cannot fathom the voluntary surrender of national sovereignty that the EU says it requires. These are all old cultures, centuries in the making, which are distinct from each other. What's so frustrating though, is that the problems are all man-made, and man-made laws are standing in the way of resolution, i.e. a country cannot leave the euro, the euro is permanent and indivisible, and that if a country actually does leave the euro, it automatically leaves the EU as well. The EU countries can continue to have the free movement of people, good and services, and they can continue to harmonize where it makes sense, but to sit back and watch as their nations wither to the status of provinces and protectorates...it's shameful.
I don't understand how the citizenry can let this happen. I thank you Firozali A.Mulla DBA



Certainly not where The Economist had wanted it to go.

But that's The Economist's problem, really.


Latest blog posts - All times are GMT
Writing worth reading: Dark matter
Babbage March 15th, 14:43
Bits and mortar: Babbage visits Ada's
Babbage March 15th, 10:22
Deportations: A kinder expulsion
Democracy in America March 14th, 21:38
Blasphemy laws: Wrong on so many levels
Erasmus March 14th, 17:20
Keynes and Hayek: Prophets for today
Free exchange March 14th, 16:43
Democracy in America March 14th, 15:55


Products & events