The Great Debate UK
-Jane Foley is research director at Forex.com. The opinions expressed are her own.-
The budget crisis facing the Greek government has drawn an array of comments and responses from various parts of the European Central Bank, the European Commission, the International Monetary Fund and the financial markets.
Academics and economists are also keen to get their pennies worth pointing out that in effect the Greek budget was an accident waiting to happen. During the early years of the Economic and Monetary Union it was no secret that some members of the system “fudged” their numbers to comply with the budgetary criteria of the Maastricht Treaty.
Such countries should have used the good growth years to initiate structural reform and fiscal restraint which would have promoted a healthy budget. In the event that they did not it would only take a recession to uncover the cracks that had been papered over.
In his cautious Franglais central-bank speak, Jean-Claude Trichet has pointed to the strong possibility that the euro zone may face a double-dip or W-shaped recession.
Of course, that's not exactly what the European Central Bank president said. But how else are we to interpret his repeated references to a "bumpy road" ahead, and his comment that we are likely to see quarters with positive growth and other quarters with "less flattering" figures? All this was illustrated with a hand gesture that drew a W (or a corrugated iron washboard) rather than a V or a U.
The debate for or against a Latvian fixed exchange rate rages on. There are good pieces of analyses on both sides of the debate, there are less good ones, there are mediocre ones – and then there is Jonathan Ford’s “Latvia: let the lat go” from 29 July.