By: Angelika

Angelika — Sat, 17 May 2014 10:20:55 +0000

Christina,Agree with most of what you write.It is largely un unnaoitral process, but the next steps could always reasonably be predicted. There is clearly a considerable degree of uncertainty. I write more from the concept that (politically) unrealistic alternatives are not considered.What I think is the best realistic way forward within the politically acceptable alternatives.My personal opinion from the start was drop Greece and PSI the rest and include Cyprus in that, heavy contractual pressure on the PIIGS to start with measures that are structural and of the size required. Like cutting 10-15% (GDP) of their apparatus and welfarestate. Bankrescue against market rates, non systemic banks let thenm go bust. Roughly.Probably would have worked better and is definitely cheaper, but was and is now still not realistic. The biggest mess imho will be a total break up of the EZ in seperate currencies. Most difficult to organise (and they are not really strong at that as we have noticed anyway).This is likely to play out with Germany getting more and more strict and the South simply forced (until the have a primary surplus) to agree. Population in the South simply saying: ‘no’, after a few years and followed by Euro exit. So most likely one at the time and from the bottom.The North alone doesnot need really such strict rules. They have shown when the currencies were pegged that it could function well even with less strict rules as now. Gentlemen’s agreement basically was enough. With the South you need a watertight contract and a baseballbat. Nobody in the North will bring by gross neglect others into danger (basically what Greece, Cyprus and Italy have been doing). Stick not only to the letter of the agreement but also to the spirit. You donot need complicated fiscal rules and banking union to make it work.

Comments on: Transizione

By: Angelika