Euro Zone

Europe’s financial alchemy starts to look SPIVvy

24 Oct 2011

The euro zone is considering subsidising leveraged funds to help fund bailouts and bond interventions. Such a scheme could support demand for sovereign debt. But Europe may need to get comfortable with using taxpayer funds to subsidise hedge-fund level returns.

It’s Italy, stupid

24 Oct 2011

The big issue dwarfing all others now in the euro crisis is how to save Italy. Financial engineering of the sort discussed at the weekend summit will, at best, buy time. Ultimately, Rome needs to save itself. With political will, it can.

Internal devaluation: it’s worth a try

24 Oct 2011

Big wage cuts should be almost as good as currency devaluation at reducing large trade deficits – in theory. In Europe, no one knows if practice will follow conjecture. But Latvia is trying and Greece is likely to follow. It’s not nice, but it might be a least bad alternative.

France can’t afford major euro split with Germany

21 Oct 2011

Divisions over the euro zone’s bailout fund have delayed the much-ballyhooed Franco-German “grand plan”. Nicolas Sarkozy seems ready to compromise yet again to keep Angela Merkel on board. He knows the euro zone wouldn’t survive a major split between Paris and Berlin.

Berlusconi opts for risky ECB row with Paris

21 Oct 2011

Ignazio Visco is highly qualified for the job as head of the Bank of Italy. But choosing Lorenzo Bini Smaghi, a member of the European Central Bank’s board, would have allowed France to nominate its candidate to the ECB’s top body. Berlusconi doesn’t need a fight with Paris now.

Europe’s bailout fund: a guide for the perplexed

21 Oct 2011

Getting more mileage out of the 440 bln euro European Financial Stability Facility is key to easing the euro zone’s debt woes. But the ECB and governments disagree about how to best stretch the fund’s finite resources. Breakingviews offers a road map through the confusion.

Euro zone won’t be saved by multi-point plans

12 Oct 2011

It may be fun to draw up lists of financial and legal tricks which could ensure bank solvency, restore investor confidence and manage or avoid sovereign defaults. But only one thing matters: the political will to preserve the single currency. The devil is not in the details.

Greece can escape death spiral

3 Oct 2011

Athens will miss this year’s budget deficit targets, thanks to global weakness and domestic austerity. Foreign creditors will call for harsher reforms. That makes economic sense, but Greek politics are tough. A larger debt restructuring may be required to turn the country around.