One of the main reasons for the euro experiment failing is the obvious fact that the eurozone doesn’t have a common language. An optimal currency area needs labor mobility — areas without jobs need to provide workers for the areas with demand for them. But it’s hard to get a good job in Germany if you don’t speak German. And so something quite astonishing is going on:
Nikos Tsafos has a fantastic post at his Greek Default Watch blog entitled “Ten Surprising Facts about the Greek Economy”. I normally hate listicles, but this one’s very good. For instance: it’s bad enough that Greek GDP won’t go back to its 2008 peak for the best part of a decade. But it’s worse that the two big drivers of Greece’s economy — tourism and shipping — are down 28% and 27% respectively in real terms since 2000.
Going into the Jackson Hole conference, everybody was breathlessly awaiting Friday’s speech from Ben Bernanke, which turned out to be incredibly boring. The most important speech of the meeting, by far, came on Saturday, and came from the new head of the IMF, Christine Lagarde. In decidedly undiplomatic prose she came right out and said what needed to be done:
This chart comes from Eric Burroughs, who calls it “one of the best gauges for showing the extreme nervousness over what the endgame really is in Europe”. But I’m assuming here that you’re not the kind of person who looks at FX volatility surfaces on an everyday basis, so it might be worth a little bit of explanation.
Larry Summers reckons that “with last week’s tumult in Italian markets, the European financial crisis has entered a new and far more dangerous phase”; he’s right about that. But his prescriptions for what must be done, laid out in the second half of his column, are a mess. For one thing, they’re impossible to implement from a political perspective. For another, they contradict Summers’s own diagnosis of what the problem is, as laid out in the first half of his column. And in any case they’re a textbook case of too little, too late: even if implemented they wouldn’t actually fix the problem.