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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.
Suddenly, Russia has become a central player in the Cypriot financial crisis. On the very evening after the Cypriot parliament rejected a proposed levy on bank deposits that the Cypriot president had previously accepted as a condition for a bailout package of €10 billion, Finance Minister Michael Sarris flew from Nicosia to Moscow. The next [...]
The decision in Europe to tax depositors in Cypriot banks, forcing them to share in the cost of the latest euro area bailout, has sparked anger in Cyprus and concern that a run on Cypriot banks could spread to Spain, Italy, and other troubled countries. But the so-called “stability levy” on all depositors, not even [...]
The recent election and political confusion in Italy indicate that political risk is back in Europe. Yet what is the real scope of the danger, and where do we go from here? To answer, it is worth noting that there were two elections in Europe, one in Cyprus and one in Italy, and in many [...]
The Irish deal with the European Central Bank (ECB) and other European central banks to relieve the huge Irish debt burden resulting from the bank bailout four years ago has arrived even faster than predicted here. This is good news. The Irish government can now avoid the €3.1 billion promissory note payment due at the [...]
Can we have the euro area crisis and its elevated bond yields back, please? In the absence of acute market pressure, euro area leaders like Prime Minister Mariano Rajoy of Spain are sitting on their hands rather than opting for stability and applying for aid from the European Stability Mechanism and European Central Bank (ESM/ECB). [...]
The euro area’s efforts to stabilize its financial picture got a boost from several developments in the last week, as the effects of the outright monetary transactions (OMT) announced last summer by the European Central Bank (ECB) continues to take hold. At the European Union Council, for example, leaders confirmed their political commitment to a [...]
After a quiet few weeks, political pressures are rising again in Europe. Pictures of petrol bombs exploding among riot police officers in Athens have returned to global television and Bloomberg screens, and news reports suggest mounting support for the rightist Golden Dawn party, bringing back questions about the durability of the summer stabilization in the [...]
I have recently returned from a trip to Greece and offer these reflections based on many conversations with policymakers and other experts. Basic Overview. After the second elections in June, New Democracy formed a coalition with the Socialist party PASOK and Democratic Left under Prime Minister Antonis Samaras. The government’s first task is to implement [...]
As usually happens when important elections and EU Council meetings are approaching, several events took place in the euro area last week. Despite the generally negative bond market reaction1 to these events, nothing suggests that the euro area is about to fall off the cliff. Indeed, while Spanish and Italian bonds have risen this week, [...]
Internal devaluation has become a big issue in the euro area but it remains controversial. In the latest International Monetary Fund (IMF) letter of intent for Greece, box 3 on “Internal Experience with Internal Devaluation” (pp. 48–49) opposing internal devaluation has been incorporated. It summarizes the standard arguments, but the point of this comment is [...]