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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
Most days we can coast along, confident that tomorrow will be much like yesterday. On a very few days we need to look hard at the news headlines, click through to read the whole story, and then completely change a large chunk of how we thought the world worked. April 28 was such a day. [...]
On the day that the Greek debt starts to spread to Portugal and Spain, and Standard and Poor’s predicts a 50 to 70 percent haircut on Greek debt, what is the official response in Europe? Simply disastrous! Spain, the holder of the European Union’s rotating presidency—in time-tested EU fashion—calls an EU Summit to discuss the [...]
As the European Union dithers and the Germans temporize at least until their May 9 election,1 financial markets (and belatedly even Standard and Poors) have awarded junk bond status to Greek debt and made a Greek default their central forecast scenario. Europe appears headed down the road of an abrupt, chaotic default proceeding or a [...]
The eurozone’s divergences can be traced back to a moment in the last decade when political behavior in Italy, France, and Germany took very different paths. I use Real Effective Exchange Rate (REER) data in both their forms (consumer price index [CPI]-based and unit labor cost [ULC]-based, as provided by the European Central Bank) to [...]
So today (Friday) Greek Prime Minster Papandreou formally fired what he has called the “loaded gun” aimed at speculators in the financial markets and formally requested that the promised aid package of up to €45 billion from the European Union and IMF be activated. The IMF announced its willingness to “move expeditiously on this request,” [...]
Now that the negotiations over financial assistance to Athens have started among European representatives, the IMF, and the Greek government, what outcomes should we expect? First, we need an honest price tag and a long-term economic restructuring plan with a chance of success. The eurozone stuck its head in the sand a few weeks ago [...]
On Thursday President Obama will give one of the defining speeches of his presidency. Most presidents are remembered for only two or three policies or events during their tenure. The Securities and Exchange Commission (SEC) case against Goldman Sachs means, like it or not, the legacy of this administration is wrapped up with the outcome [...]
Even as it struggles to deal with Greece’s problems, the European Union is undertaking another vital effort—overhauling its framework for financial regulation, including establishment of the first EU-level financial supervisory authorities. The outcome of the European legislative process is uncertain, but it will have a decisive impact on the shape of Europe’s financial system. The [...]
The news that Greek 10-year bond yields are now above 7.5 percent—significantly above the rate just before the announcement of a joint eurozone/IMF rescue of at least €30 billion—deals a new blow to eurozone leaders. Financial markets are basically telling them that in rescuing Greece, they may be wasting their money! Ironically, Greece’s misfortunes may [...]
If China does let its currency start rising again, as widely speculated, the overriding issue is whether it will move quickly and substantially enough. The renminbi is undervalued by about 25 percent on a trade-weighted average basis and by about 40 percent against the dollar. No one expects China to curtail this huge misalignment in [...]