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BRUSSELS — Worries about Greece’s electoral turmoil and Spain’s spiraling borrowing costs are piling the pressure on European Union leaders meeting in Brussels on Wednesday amid renewed market pressure to keep the region’s debt problems from getting worse.
Spain’s prime minister warned that his country can’t continue much longer with its current high borrowing rates and urged a joint European response to help.
More than one kind of damaging domino effect is possible if Greece is forced to abandon the euro
Most discussion about a potential breakup of the Eurozone assumes that Greece and other financially troubled countries would be the ones who ended up abandoning the common euro currency. But there’s a compelling alternative to that conventional wisdom – that the true problems of the Eurozone could be best addressed if Germany were the one to leave, accompanied, perhaps, by a few other rich countries.
A break-up in the Eurozone just got more real with the announcement of the short-list for the Wolfson Economics Prize. This years challenge question was: “If member states leave the Economic and Monetary Union, what is the best way for the economic process to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?”
The most recent Greek bailout appears to be successful. As a result, worries about the European financial crisis have diminished somewhat. Indeed, European Central Bank president Mario Draghi has said that the worst is over for the Euro currency zone. Such optimism may be premature, however. Not only does Greece remain a long-term financial concern, but in addition Portugal is on track to become a second big problem.
That’s the $64,000 question, particularly for the U.S. presidential elections – if things keep improving, it’s only good news for Obama. The economy has been on a roll this year, with unemployment down, consumer and business confidence up, inflation falling, and monetary policy still loose.
So it looks like Greece will dodge a default, at least for now. The Greek parliament passed a new $4.4 billion austerity package on Sunday, which includes a painful 22% cut in the minimum wage and 150,000 public sector job losses. Greece’s euro zone partners were demanding the country approve these painful measures in return [...]
This week’s edition of TIME International features an interview with Italian Prime Minister Mario Monti (subscribers can read the story here). In the mean time, check out our video interview with Italy’s new leader.
Cheap loans being offered by the European Central Bank to help reflate the Eurozone are encouraging some banks to boost their profits by loading up on risky bonds.
I just landed in Rome for some on-the-ground reporting on the latest twists and turns in the euro-zone debt crisis, and I immediately got some sound insights from our reporter here, Stephan Faris. Faris watches the situation in Italy more closely than I do, and he makes the point that Rome simply would not pursue any [...]
