European Investment Correspondent
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Nov 11, 2011
Nov 10, 2011
Nov 10, 2011
Nov 10, 2011
Nov 10, 2011

Quiet academic Papademos to take helm of chaotic Greece

LONDON (Reuters) – There is an irony in Lucas Papademos taking over as Greek prime minister to help his country survive in the euro zone: He was one of those who eased Greece into the single currency in the first place.

As head of Greece’s central bank from 1994-2002, the cautious, quietly spoken technocrat fought rocketing inflation and sought to impose monetary discipline on a country that frankly has never had any.

Along the way, he gathered enough kudos among Europe’s leaders and with financial markets to find himself — to his own surprise — appointed as vice president of the European Central Bank, one of the highest international posts ever held by a Greek.

There is little doubt that background, along with a stint at the Federal Reserve Bank of Boston, qualifies him more than perhaps any one else to understand both the economic and international implications of Greece’ debt debacle.

He is also cut from that modernist Greek cloth that eschews the kind of nationalistic chest-beating and conspiracy-driven machismo that has so often hurt the country’s relations with others.

But the question is whether a somewhat introverted academic like Papademos can handle the rough and tumble of Greek politics, which includes violent street clashes and harsh personal enmities in parliament.

He is not unfamiliar with the syndrome but may be uncomfortable with it. As central bank governor he was widely condemned in the late 1990s for suggesting — rightly as it turns out — that Greece’s stock market was a dangerous bubble.

Nov 10, 2011
Nov 10, 2011

Why is the euro still strong?

One of the more bizarre aspects of the euro zone crisis is that the currency in question — the euro — has actually not had that bad a year, certainly against the dollar. Even with Greece on the brink and Italy sending ripples of fear across financial markets, the single currency is still up  1.4 percent against the greenback for the year to date.

There are lots of reasons for this. The dollar is subject to its country’s own debt crisis, negligible interest rates and various forms of quantitative easing money printing — all of which weaken FX demand. There is also some evidence that euro investors are bring their money home, as the super-low yields on 10-year German bonds attest.

Finally — and this is a bit of a stretch — some investors reckon that if a hard core euro emerges from the current debacle, it could be a buy. Thanos Papasavvas, head of currency management at Investec Asset Management, says:

Let’s assume there is some sort of breakup … if the euro is the currency of a potentially core set of economies, then it would be an incredibly strong currency

Of course, there is the question of whether $1.36 or thereabouts represents a strong euro against the dollar.  Lots of people, for example, tend to judge it by the $1.17 rate at which the euro was introduced.  But the following graph suggests that if you give the euro a longer historical life, it is not all that much above its average value. Still higher than some might have expected give the crisis that is threatening it entire survival.

 

Nov 9, 2011
Nov 9, 2011
Nov 9, 2011
    • About Jeremy

      "Editor-in-Charge of EMEA Treasury & Markets Desk, based in London. Previously European Investment Correspondent, bureau chief for Greece and Cyprus in Athens and senior correspondent for the European Union in Brussels. Began career covering U.S. politics in Washington D.C."
      Joined Reuters:
      1990
      Languages:
      English, French, some Greek
      Awards:
      State Street Investment Correspondent of the Year, 2007
      Part of Emmy-nominated team for
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