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Risk-free no more (part II)

In comparison to the private sector of the economy, the public sector is always and everywhere regarded as inefficient. Governments are notorious for overpromising, overspending and underdelivering. Yet sovereign defaults are much less common than corporate failures. How come? Public finances differ fundamentally from corporate finances. For starters, governments enjoy a budget flexibility that corporates … Continue reading

Risk-free no more (part I)

My main objection against the euro stems from the realization (post fact I must admit) that the common currency has resulted in an increase of macro and systemic risks across the countries of the eurozone, despite the initial intention of eliminating currency risk and harmonizing monetary policies across the region. One risk that sharply increased in … Continue reading

The non-origins of the euro crisis

It seems that something has changed lately in the economy of the eurozone. No, I don’t mean that we now “see the end of the tunnel” as the political leadership of the eurozone would like us to believe. Besides, even if we were at the end of the tunnel that wouldn’t mean much if we … Continue reading

Germany’s game

Ever since the euro crisis erupted the blame game for its origins has been heavily one-sided against the southern peripheral states, which for long lived beyond their means on borrowed money. A few voices have tried to assign the blame also on Germany due to its efforts to suppress Germans’ wages, but the truth is … Continue reading

On that fiscal multipLIEr

This Sunday, Deutsche Welle published a short interview with the head of the IMF, Christine Lagarde (link to interview here). The interview did not attract particular attention in other media, but the issue of the underestimated fiscal multiplier came up again, so I found this to be a good opportunity for a comment on the … Continue reading

A debt like no other

Another post, another visit to the Eurosystem’s filthy halls and to the seemingly forgotten topic of TARGET2. In previous posts (here and here) I described the macroeconomic and financial dysfunctions of the euro caused by TARGET2, while in this one I describe the TARGET2 claims as an asset class. I argue that these claims have … Continue reading

Why the euro?

More than three years have passed since the euro crisis erupted. Or four, or five depending on where one wants to start counting. For a currency that has been around for not more than twelve years, the crisis has lasted long enough to make people sick of it already. Alas, reality often defies logic. I … Continue reading

About Cyprus (part II)

The latest deal about Cyprus was a good reminder that nothing has yet been fixed in Europe and nothing has been learnt about the origins and nature of the euro crisis. While the deal still remains sketchy three whole weeks after the initial agreement, the analysis of what went wrong in Cyprus remains sketchy too. … Continue reading

About Cyprus

What a weekend. The last two days have awakened the beast of the euro crisis once again and me too from a prolonged posting hibernation. The latest developments regarding the bailout of Cyprus called for a brief commentary. My initial reaction to the news of the impairment of depositors of Cypriot banks was one of … Continue reading

A rogue central bank

In previous posts I tried to explain why the euro is a flawed currency and how its flaws can be traced into the function and the balances of TARGET2. In all fairness however, one cannot put the blame for the euro crisis on TARGET2 since after all it is nothing more than a payments system. … Continue reading