The inventors of democracy and its greatest 18th century champions both go to the polls this weekend. Greek and French voters will try to elect governments they hope will help release their economies from the grips of the euro zone debt crisis.
Americans are all too acquainted with the shouting-match politics that tends to accompany any debate over economic policy: everyone is yelling and nobody is listening. The toxic political discord in Washington has become so familiar it is almost a cliché.
There’s no other way. In order for Europe to hold together as a monetary union it must be able to issue a currency region-wide bond. That’s according to Christopher Sims, Nobel-prize winning economist and Princeton University professor, speaking on a panel at the IMF over the weekend:
There’s a sense of relief among European policymakers that the worst of the euro zone’s crisis appears to have passed. Olli Rehn, the EU’s top economic officials, talked this week of a “turning of the tide in the coming months”. Mario Draghi, the president of the European Central Bank, speaks of “sizeable progress” and “a reassuring picture”.
Things are looking a bit unsteady in the euro zone’s economy. Just ask Olli Rehn, the EU’s top economic official, who warned this week of “risky imbalances” in 12 of the European Union’s 27 members. And that’s doesn’t include Greece, which is too wobbly for words.
The words “European bailout” normally conjure up images of inefficient public sectors, bloated pensions, corrupt governments. But market analyst John Hussman, in a recent research note cited here by Barry Ritholtz, says the reality is a bit more complicated:
Prime U.S. money funds further reduced their holdings of euro zone bank paper in December, although the pace of movement slowed while investors continued to hedge against any bank failures, J.P. Morgan Securities said on Wednesday. The slower movement out of euro zone bank paper was the result of money funds having already strongly reduced their holdings, J.P. Morgan said in a note to clients.
Wall Street firms are begging the U.S. Treasury to take their cash, at least judging by the latest auction of short-term Treasury bills. Treasury sold $30 billion of four-week bills at a “high rate” (pause for laugther) of 0.000% on Wednesday, a mix of strong demand for year-end portfolio shuffling but also a reflection of ongoing fears of a credit crunch emanating from Europe.