Societe Generale's Marcussen says Eurozone needs austerity, growth and risk sharing. She believes the European Stability Mechanism (ESM) may be granted a banking license. This would allow it access to the ECB and to directly recapitalize national banks.
Rosenberg says Europe is approaching its existential moment. Seems to think ECB can kick the can down the road and will do so in the eleventh hour (perhaps through the ESM).
Neil Ferguson wants Eurobonds. He notes that even if adopted along with the structural reforms, economic prospects in Europe look ”bleak” for the next five to ten years.
It is conceivable that, faced with an existential question, Germany may sign on to Eurobonds (though I don’t think this would be in the long term interests of German voters to agree to this). And that we will get a recapitalization of the European banking system through the ECB. As noted, the later is much more likely in the short term. Der Spiegel lists both ideas as crucial to saving the Euro.
I just don’t believe the competitive dynamics generated by the common currency, the Euro, are sustainable and that the degree of fiscal integration required to give it a proper chance of working is achievable The.Eurozone’s needs of austerity, growth and risk sharing are of course competing interests (more risk sharing promotes less austerity, more austerity promotes less growth etc).
Of course, all of the potential paths of how the Eurozone might unfold have an associated probability. I however haven’t heard a convincing case of why and how the Eurozone will function in the long term as a stable economic union. All I get is that the consequences of failure are so high that those European politicians will have to do whatever it takes to save it. What is Spain going to produce? Are labour market reforms in Italy going to get rid of unsustainably high youth unemployment? Since the 1950s, European growth has only outpaced US growth 9 times. Since US growth sucks, and my view iis that is likely to continue to suck for many years to come (see my last post) I fail to see a sustainable transition path for Europe.
I remain, as ever, a Eurosceptic. Maybe I am missing something?