Counterparties: Change comes to Europe
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Change, of a sort, has come to Europe. On Sunday, François Hollande became the first Socialist president of France in almost two decades. The NYT, WSJ and Bloomberg each covered the results as a blow to German-led austerity. Greece, for its part, had a far more tumultuous election, in which attempts to form a new government may result in yet another vote.
If austerity has upended politics in Greece and France, it’s less clear how it will affect EU politics. Despite the election of France’s new anti-austerity president, Tyler Cowen rightly notes that a decline in trust among European leaders could prove as big a setback as any specific policy disagreement. Matt Yglesias is also not sure Hollande will radically change things: The debate, he writes, needs to become “more partisan, reflecting two different visions of a common European future rather than a bunch of different national agendas.”
Of course, Hollande cannot unilaterally push Germany’s Angel Merkel to endorse a stimulus package, and Mario Draghi suggested last month he thinks the ECB’s role is largely over.
Europe has a choice about what it wants to do now, Ezra Klein writes. The most likely option, despite Draghi’s comments, is that the ECB may be pushed to do even more. Mainly Macro sees the problems of Greece as an exception that demonstrates the need for the ECB to truly act like the euro zone’s central banker and publicly state inflation and interest rate targets. Of course, such a plan would erode many of the benefits Germany reaped from the euro, which are well documented.
Or, it could be that we just get kinder, gentler austerity. Christine Lagarde and Anders Borg, writing on the IMF’s blog, say that “fiscal adjustment should be done in a way that protects the poor and most vulnerable, and shares the burden across the population.” – Ben Walsh
And on to today’s links:
Cowen: Never mind Europe, start worrying about India – NYT
Why Obama should recess-appoint Christina Romer to the Fed – The Atlantic
Obama’s two Fed nominations killed by Congress – Reuters
An excellent, wonky guide to our incredible shrinking labor force – Rortybomb
“The average VC fund returns less money to investors than they invested in the first place” – Felix
Stop demonizing Putin – Stephen F. Cohen
A London divided against itself – John Lloyd
What a Euro growth pact should contain – Hugo Dixon
Social Security is not going broke – David Cay Johnston
Why you shouldn’t count on radical change from France’s new Socialist president – Bloomberg Businessweek
If you randomly picked 12 countries from across the globe, they’d fit together better than the EU – The Atlantic
Greece plunges into turmoil after voters reject austerity – Guardian
Citi: There’s a 75% chance that Greece leaves the euro zone in 18 months – CNBC
Krugman: Europe’s voters “are wiser than the Continent’s best and brightest” – NYT
Germany, for better or worse, is still in control of Europe’s economic path – WSJ
Greece’s democratic left refuses to join the bailout alliance – Reuters