Monthly Archives: July 2012

Eurozone Policy Response in Suspended Animation

Europe’s policy response to the ongoing sovereign debt and banking crises on the continent’s periphery appears to be in suspended animation. There is a conflict between short-term expediency and long-term strategy, as was clear from the most recent European Council summit.

Spain, Italy and those debtor countries locked out of the bond markets are pushing for a speedy resolution that brings their financing costs down to sustainable levels. Among their desired outcomes are a mutualization of sovereign debt at a Eurozone level and / or unlimited ECB bond purchases on the secondary market.

The German-led creditor bloc is understandably reticent. It is they who feel they will foot the bill, after all. Their concern is ‘moral hazard’: if they give in to debtors’ demands, they fear all impetus for discipline and reform will be lost. One way of putting it might be that they are as yet unwilling to buy the first round of drinks, in case others fail to do their duty. Continue reading

Counterblast: Debunking the Baltic Myths

Here is a pamphlet I was commissioned to write for the Irish Congress of Trade Unions. It examines the recent economic experience of Latvia, Lithuania and Estonia, seeking to draw lessons for the Irish case.

The so-called Baltic Miracle has been held up as a shining example for Ireland and others to follow. Unable or unwilling to devalue their currencies when the financial crisis struck, the Baltics implemented the latest shock-therapy whizz: internal devaluation. Continue reading