Comments on: Political economy and the euro http://blogs.reuters.com/macroscope/2010/02/08/political-economy-and-the-euro/ Shining a light on the dismal science Wed, 16 Nov 2016 01:39:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: SpanishBill http://blogs.reuters.com/macroscope/2010/02/08/political-economy-and-the-euro/comment-page-1/#comment-1614 Tue, 09 Feb 2010 15:15:25 +0000 http://blogs.reuters.com/macroscope/?p=2865#comment-1614 Nice piece Mike.
Looking at the debate raging in the Spanish press, the comical spat with FTAlphaville, and so on, I’m in two minds as to whether the penny is dropping in the biggest domino Spain (or is it the UK?).
In recent times, Spain has demonstrated its capacity to slash its fiscal deficit. But go further back and the country has a long history as a defaulter. Spain’s relatively nasty and federated internal politics is also a barrier to reform.
What is clearer is that the crisis has revealed the fundamental imbalances within the Spanish economy that will ensure Spain is a euro zone loser for some time to come. Seeing Spanish (and other) government ministers kow-towing to the City with begging bowls will also give a whole new meaning to mainland Europe’s obsession with perfidious Anglo-Saxon economics.

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By: CrisisMaven http://blogs.reuters.com/macroscope/2010/02/08/political-economy-and-the-euro/comment-page-1/#comment-1613 Mon, 08 Feb 2010 19:58:06 +0000 http://blogs.reuters.com/macroscope/?p=2865#comment-1613 In and of itself a Greek bankruptcy or bond default should -in theory- not affect the Euro as such very much, Greece being maybe 3% of the total. However, just as a Californian bankruptcy would reflect badly on the “state of the Union” as a whole so would the default of on EU country, coupled with the rising interest rates and thus further destabilisation of the remaining over-leveraged member states, make investors wonder when sovereign default across the board is likely. Thus they wouldn’t commit themseves to bonds of longer maturity and that’s the beginning of the end.

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