Europe slides towards the next Minsky Moment

May 19, 2014

The euro zone’s near collapse followed the American economist’s model - excessive confidence in the currency’s stability bred massive instability. The crisis led to genuine improvements, but investors are once again looking over-confident. The risk of a repeat has increased.

Euro crisis 2.0 will need a new shock absorber

April 4, 2014

European banks kept yields in check by buying sovereign debt in 2010-13. Now that Basel III rules force losses to be deducted from capital, banks like BPI are shedding their holdings. It unpicks the notorious “doom loop,” but leaves the ECB explicitly on the hook in future.

Spain’s bank rescue is part bail-in, part bail-out

November 29, 2012

Madrid has lopped 10 bln euros off its bank rescue tab by cutting the value of its worst lenders’ hybrid debt. Ireland’s 2011 haircuts were steeper. Politics means Spain had to balance burden-sharing with ways to soften the blow for the retail punters who must share the pain

Soft approach sadly best for next Greek debt deal

November 1, 2012

Euro zone officials should haircut Greece’s debt again, because it is clearly unsustainable. But that would be politically dangerous in the current context, and delay economic reforms. The sad reality is that Greece must be kept hanging on a little longer.

Cyprus is the last of Europe’s baby bailouts

June 27, 2012

Cyprus said on June 25 that it would seek aid from euro zone partners to help recapitalise its banks and fund its economy. The bailout may total as much as 10 billion euros, according to two euro zone officials, Reuters reported on June 26.

Portugal doesn’t require Greek remedy for now

April 17, 2012

A Greek-style debt restructuring isn’t an inevitable outcome for Portugal. Lisbon could get a second bailout without forcing losses on creditors, partly because a default might drag down Spain or Italy. Still, bondholders shouldn’t count on contagion fears shielding them forever.

Spain can’t avoid austerity conundrum

March 30, 2012

A general strike won’t turn back the clock on labour market reform and the coming budget cuts look inevitable. Too much austerity could be self-defeating and even unrealistic, but Prime Minister Rajoy cannot afford to waver after his earlier deficit faux pax.

Now prepare for the next crisis

By Edward Hadas
March 9, 2012

The euro zone has overcome enough of its fundamental weaknesses to defuse the Greek debt bomb. But the financial system is as distorted as ever. A purely financial crisis is possible in the next two years. A financially enhanced political crisis may be even harder to avoid.

Euro zone first default gives few reasons to cheer

March 9, 2012

Most Greek creditors have agreed to take a loss on their 206 bln euro holdings. The euro zone’s first restructuring should not be chaotic. But it has done away with the pretence that a sovereign’s signature is always golden. And Greece still struggles with a heavy debt load.

2012: another year of living euro-dangerously

January 5, 2012

Europe will keep the world on edge in 2012. More will be needed to shore up Italy and keep the single currency more or less intact. But the U.S. should keep recovering. And China and emerging markets may cut rates and help their consumers – and global rebalancing.