The current global financial crisis has ironically produced a rather surprising and benign unintended consequence. Since financial globalization has shaped the world’s macroeconomic paradigm after the Bretton Woods system, the current status quo has come under fierce criticism. More specifically, the dollar’s “exorbitant privilege” is no longer considered to be a granted right, in particular after the recklessness of U.S economic activities prior to the financial meltdown has become evident.
Posts Tagged ‘ Financial crisis ’
The European economy is in the midst of the deepest recession since the 1930s. Although its size and extent are exceptional, the crisis has many features in common with similar financial-stress driven recession episodes in the past. Signs of improvement have appeared recently, but recovery remains uncertain and fragile. Fortunately, the EU’s response to the downturn has been swift and decisive. At present, governments
and central banks are well aware of the need to avoid the policy mistakes that were common at the time of the Great Depression, both in the EU and elsewhere.
Recently Prof. Joseph Stiglitz, one of the world’s most famous and popular economists presented his latest bestseller “The Price of Inequality” at an event of the German Council on Foreign Affairs. EST’s Stylia Kampani was around and presents a summary and some thoughts on its content.
While the rampant inferno of the financial crisis has been temporarily contained, Finland has recently stunned EU leaders, who have been promulgating the importance of the financial bailouts for both Greece and Spain by contemplating a Finnish exit from the eurozone. Henri Erti explains why Helsinki believes this might be wise.
The possible implementation of a common system on taxing financial transactions on EU level in the middle of the looming euro crisis may seem to some like a rescue plan, but for others is simply reckless. Opinions about the financial transactions tax (FTT) proposed last September by the European Commission not only diverge drastically, but arguments evoke a whole wide variety of geographical associations, from the French Tobin tax to the UK City of London.
The financial markets have been subject to considerable criticism in the last weeks; analysts are worried that financial considerations will dictate decisions that should be taken via a democratic process. By analyzing the reasons and the effects of the criticized behavior the conclusion must be drawn that Europe in the long term should be grateful for the present warnings of the market.
Eurozone leaders have agreed to boost the European Financial Stability Facility’s lending capacity to one trillion euro, believing that this should calm markets and prevent the “contagion” from spreading to Italy or Spain. However, there’s neither an agreement yet on how to “lever” the EFSF, nor on who is going to pay for it. A short overview might shed some light on the issue.
In the turmoil of the European financial crisis, the project of European integration seems to have lost its appealing attractiveness. Our politicians are not considered to be the leaders Europe needs. The European Court of Justice however continues to stress the importance of the European project and its approach towards Europe and its importance provides some useful lessons for our politicians in order to become true leaders.
At times it feels like the story is repeating itself over and over again: The EU helps Greece re-finance its loans, and in return asks the country to reform and modernise. Then Athens announces that measures will fail to bring about the desired results and the EU urges the government to take even more drastic actions. To no avail. It’s time to let Greece default. Any other solution will fail and be more costly.
The EU stands at a historical crossroads today and it has to make a difficult choice. Its decision could send it on the path of ever-closer cooperation and prosperity, or initiate a very slow process of dissolution. The problems Greece faces today are thus much more significant than they seem initially and require more than a technocratic approach to be solved. What Europe needs is somebody with a vision, a truly European leader.