Opinion

Paul Taylor

For euro zone, breaking up is just too hard to do

Paul Taylor
Nov 29, 2010 07:01 UTC

PARIS (Reuters) – Unlike true love, the euro really is forever.

That may seem a reckless notion to advance just as Ireland becomes the second highly indebted member of the 16-nation single currency area to require a bailout, following Greece, and as bond markets close in on Portugal and Spain.

But the cost to any country of leaving the euro zone would be so high, and the damage that an exit would inflict on the currency and the remaining members so great, that no government would rationally choose to secede, or to push another out.

Argentina’s 2001-2002 economic crisis and $100 billion bond default, which reduced millions of people to poverty, would pale in comparison with the likely chain reaction across Europe.

“There would be chain bankruptcies. A run on the banks would be certain. It would be far worse than Argentina,” said Jean Pisani-Ferry, director of the Brussels economic think-tank Bruegel.

The “costs of the non-euro,” as they are sometimes called by Brussels insiders, would be multiple: political, economic, social, reputational and strategic.

Elephant and gazelle: Axel Weber woos the French

Paul Taylor
Nov 25, 2010 13:04 UTC

PARIS, Nov 25 (Reuters) – It was like watching an elephant
trying to woo a gazelle.

As Axel Weber lumbered through his seduction dance before
France’s policy elite on Wednesday evening, there seemed a
constant risk that he might accidentally crush the object of his
desires.

The head of Germany’s Bundesbank and undeclared candidate to
succeed Jean-Claude Trichet as head of the European Central Bank
next year did his best to soften his hawkish image and cast
himself as the strongest supporter of European monetary union.
Addressing some 120 businessmen, bankers, policymakers and
opinion leaders at the German Embassy in Paris, Weber evaded
questions about his ambitions and focused on his commitment to
saving and strengthening the euro. [ID:nLDE6AN28M]

No risk of euro zone breakup in Irish crisis: EU

Paul Taylor
Nov 25, 2010 11:03 UTC

BERLIN/PARIS (Reuters) – Senior euro zone officials dismissed any risk of the single currency area breaking up after financial markets, alarmed by Ireland’s debt crisis, forced the borrowing costs of Portugal and Spain to record highs.

“There is zero danger,” Klaus Regling, chief of the euro’s financial safety net, European Financial Stability Facility (EFSF), told German daily Bild in an interview published on Thursday when asked if the euro zone could break apart.

“It is inconceivable that the euro fails,” he said.

Some economists and commentators, mostly in Britain and the United States, have suggested the 16-nation common currency launched in 1999 could split because of peripheral members’ high debts and deficits, and a loss of competitiveness with Germany.

Euro will survive -ECB’s Weber

Paul Taylor
Nov 24, 2010 21:21 UTC

PARIS, Nov 24 (Reuters) – European Central Bank Governing
Council member Axel Weber said on Wednesday he was convinced
the euro would survive and that a financial safety net created
by euro zone governments would be enough to withstandspeculators.

Weber, also president of Germany’s central bank, said he
believed euro zone states could come up with more money if the
existing 750-billion-euro safety net ever proved insufficient.

Weber, who was speaking at a German Embassy dinner in
Paris, said reintroducing Germany’s former Deutschemark
currency would not be an alternative to the euro, which was
launched in 1999.

Ireland’s corporate tax in dispute in EU rescue

Paul Taylor
Nov 19, 2010 18:06 UTC

PARIS (Reuters) – Ireland’s ultra-low corporation tax rate, a magnet for foreign investment over the last decade, is at the centre of a tug-of-war between Dublin and its European partners over an expected financial rescue.

The government is simultaneously seeking tens of billions of euros in EU and IMF assistance to cope with the huge liabilities of its shattered, state-guaranteed banks, and refusing to contemplate any increase in the iconic 12.5 percent tax rate.

Finance Minister Brian Lenihan said on Thursday he had made clear to all international partners that the tax rate was “an absolute red line”, and Deputy Prime Minister Mary Coughlan said it was “non-negotiable”.

Analysis: Ireland’s corporate tax in dispute in EU rescue

Paul Taylor
Nov 19, 2010 16:26 UTC

PARIS (Reuters) – Ireland’s ultra-low corporation tax rate, a magnet for foreign investment over the last decade, is at the center of a tug-of-war between Dublin and its European partners over an expected financial rescue.

The government is simultaneously seeking tens of billions of euros in EU and IMF assistance to cope with the huge liabilities of its shattered, state-guaranteed banks, and refusing to contemplate any increase in the iconic 12.5 percent tax rate. Finance Minister Brian Lenihan said on Thursday he had made clear to all international partners that the tax rate was “an absolute red line,” and Deputy Prime Minister Mary Coughlan said it was “non-negotiable.” Yet the finance ministers of France and Austria and a senior German lawmaker have all said that the business tax, long seen by higher-tax European countries as unfair competition, should be addressed in the negotiations.

It may be hard to explain to European taxpayers, facing spending cuts and tax increases at home, why they should lend money to the wealthier-than-average Irish if Dublin is unwilling to raise more revenue itself from business.

Euro zone seems at a loss to stop the rot

Paul Taylor
Nov 17, 2010 16:44 UTC

PARIS (Reuters) – Despite public assurances of unity and determination, it’s not clear that euro zone finance ministers know how to stop the rot gnawing away at the 16-nation European currency area.

Ireland, the latest member to come under intense bond market pressure, agreed on Monday to discuss with an EU-ECB-IMF team how to stabilise its state-guaranteed banks but continues to resist applying for the kind of state bailout granted to Greece.

Even if, as seems likely, Dublin accepts an international rescue after more face-saving words, analysts increasingly doubt that will stop contagion spreading to fellow weakling Portugal and, more ominously, perhaps to the much larger Spain.

Analysis: Euro zone seems at a loss to stop the rot

Paul Taylor
Nov 17, 2010 15:40 UTC

PARIS (Reuters) – Despite public assurances of unity and determination, it’s not clear that euro zone finance ministers know how to stop the rot gnawing away at the 16-nation European currency area.

Ireland, the latest member to come under intense bond market pressure, agreed on Monday to discuss with an EU-ECB-IMF team how to stabilize its state-guaranteed banks but continues to resist applying for the kind of state bailout granted to Greece.

Even if, as seems likely, Dublin accepts an international rescue after more face-saving words, analysts increasingly doubt that will stop contagion spreading to fellow weakling Portugal and, more ominously, perhaps to the much larger Spain.

Agendas clash in Irish rescue ballet

Paul Taylor
Nov 15, 2010 17:44 UTC

PARIS/BERLIN (Reuters) – In the murky ballet over a financial rescue for Ireland, the agendas of the key players in Europe are often at odds, clouding the message to markets and deepening the sense of crisis in the euro zone.

The latest country in the currency bloc to come under bond market pressure over its finances, Ireland is resisting a push from some European officials to apply for assistance out of an avowed determination to preserve its sovereignty, but probably also due to electoral considerations.

The European Commission and the European Central Bank have an interest in an early resolution to prevent contagion causing a wider euro area meltdown, as it threatened to do at the height of Greece’s debt crisis in April.

Analysis: Agendas clash in Irish rescue ballet

Paul Taylor
Nov 15, 2010 14:35 UTC

PARIS/BERLIN (Reuters) – In the murky ballet over a financial rescue for Ireland, the agendas of the key players in Europe are often at odds, clouding the message to markets and deepening the sense of crisis in the euro zone.

The latest country in the currency bloc to come under bond market pressure over its finances, Ireland is resisting a push from some European officials to apply for assistance out of an avowed determination to preserve its sovereignty, but probably also due to electoral considerations.

The European Commission and the European Central Bank have an interest in an early resolution to prevent contagion causing a wider euro area meltdown, as it threatened to do at the height of Greece’s debt crisis in April.

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