Far be it from bondholders or banks that caused the debt crisis to be punished for their sins, German 'Wise Men' push for wealth seizure to fund EMU bail-outs.
Two top advisers to German Chancellor Angela Merkel have called for a tax on private wealth and property in eurozone debtor states to force the rich to fund rescue costs, marking a radical new departure for EMU crisis strategy.
Yves here. I don’t know whether to be relieved or annoyed to see Carmen Reinhart and Ken Rogoff retreat from their pro-austerity stance and endorse debt restructuring, since their prior view (that budget-cutting was necessary and productive) served to justify considerable and unnecessary pain being inflicted on periphery Eurozone countries to preserve the illusion of health of French and German banks.
PAUL KRUGMAN reminds us that the problems of southern Europe are not caused by past profligacy. He is right in some sense. It is true that according to any off-the-shelf definition of the government budget, a number of these countries (though certainly not all) were doing fine: running surpluses and reducing the debt burden. Yet it isn't clear that a static, cash-basis accounting concept of the government budget is the most reasonable.
Italy is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately.
Mediobanca, Italy’s second biggest bank, said its “index of solvency risk” for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs.
The next few months will be critical for high-stakes negotiations underway in Cyprus, where exposure to the Greek financial crisis and domestic economic troubles have left the government teetering on the brink of default and banks running dangerously short of capital.
About six weeks ago, there was some seriously gleeful backslapping going on in Europe. A perception took hold that Europe's leaders, employing promises of bail-outs, budget austerity programs and Eurozone reform, had managed to stem the debt crisis that ravaged through the continent in the first half of 2010.
Japan's central bank becomes the latest to ease monetary policy by launching a surprise 10 trillion yen (£80bn) boost to its money printing programme, as speculation continues over a full Spanish bail-out.