BBO Discussion Forums: The future of the Euro - BBO Discussion Forums

When I first moved to England I was very amused at the approach to distance! But anyway I used the United States as an example because it is a territory approximately the size of Western Europe, with a single currency, and where mobility is easy and even quite attractive to a majority of people.

Looking at this map, it appears the US is about twice the size of Western Europe. Agree with the rest of your post, though.

A Portuguese job seeker, however, will not readily investigate positions in Austria or the Netherlands, even if information about them is easy to find. Leaving one's family in New York and moving to California is far easier and more comfortable than leaving one's family in Finland and moving to Greece, even though the latter involves a considerably shorter distance. And if, suddenly, a vast majority of people became more inclined to live in a foreign country, the language barriers alone would make mobility an illusion.

Well, specifying Western Europe was my mistake, since the EU covers almost all of Europe. Then the sizes might be closer!

The chart below shows movements in bond spreads over German Bunds since the July 21st summit in Brussels for the five euro-area economies most in the limelight (setting tiny Cyprus to one side). The three economies to have been bailed out already—Greece, Ireland and Portugal—have seen spreads drop on the promise of lower interest rates and longer debt maturities.

But the spreads for Italy and Spain, both far bigger economies, continued to go up this week. Spain’s sovereign-debt rating was put on negative review by Moody’s this morning. Adding to the uncertainty, José Luis Rodríguez Zapatero, the prime minister, today announced an early election, to take place in November.

Italy sold €8 billion ($11.4 billion) of ten-year bonds on July 28th but had to pay a yield of 5.77% to do so, the highest level at auction for 11 years. Making matters worse, European politicans have gone back to making unsettling comments after their brief show of discipline at the summit: Wolfgang Schäuble, Germany’s finance minister, said this week that he would not be writing any blank cheques to the euro area’s bail-out fund, the size of which is inadequate to ringfence Spain and Italy.

This week also saw the release of the first annual report of America’s Financial Stability Oversight Council (FSOC), a regulatory body that was set up by the Dodd-Frank act to monitor systemic risks to the country’s financial system. It has little to say about the risk of a self-harming government, but for a report that is supposed to identify threats to America, its main effect is to underline the vulnerability of Europe’s banking system.

America’s banking industry remains much less concentrated than Europe’s, and the size of the largest banks relative to GDP is lower, too. American banks have raised capital assiduously over the past two years as many European ones have dithered. American money-market funds are big funders of European banks, notably in the core countries; asset outflows from these funds may be prompted by worries over the American debt ceiling but will have an impact across the Atlantic.

The political impasse in Washington, DC, will be the big story of the coming days. Given enough dogmatism and stupidity, it might be an enormous financial one, too. But the bigger cause for concern lies in Europe.

The EU should have given a very clear signal right at the beginning, when Greece joined the EUR: that non-Greek tax-payers will take zero responsibility for Greece's debt and that the fact that Greece is now an EUR country makes no difference in that respect.

1 U.S. dollar = 0.765597127 Swiss francs. The Euro is still above the CHF but that may be a matter of time.

This gives hundreds of thousends Poles a real headaches, They are trapped as their loans and mortages were taken in CHF / due to the low long-term interests /,And when they were taking it, the Swiss franc cost about 2 Polish zlotys. Current exchange rate = 3,65.

The Euro is now 1,43$, do we need a topic 'The future of the Dollar'

Aug 7 (Reuters) - The Euro system of central banks has decided to intervene decisively on markets to respond to the escalating debt crisis, a euro zone monetary source said after a European Central Bank conference call on Sunday.

Officials on the conference call carefully considered the situation in Italy and Spain, and took note of a statement by France and Germany which stressed their commitment to European financial reforms, the source said.

"The Euro system will intervene very significantly on markets and respond in a significant and cohesive way," the euro zone monetary source said, adding a statement by the ECB will be issued shortly. (Editing by Sophie Hares)

Via Calculated Risk via Krugman



The ECB calls.

Yes the next worry is the ECB hurting its balance sheet?