Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Euro Area In 'Deep Trouble', European Union Could Fall Apart Right Now

Politics / Eurozone Debt Crisis Mar 22, 2013 - 04:32 AM GMT

By: Bloomberg

Politics

Paul De Grauwe, a professor at the London School of Economics, told Tom Keene on "Bloomberg Surveillance" today that the euro area is at risk because "so many big mistakes have been made."

De Grauwe went on to say that the "ineptitude of policy makers" allowed Cyprus to "degenerate into systemic crisis" and that European leaders should not allow Russia to take over gas in Cypriot waters as it would allow Russia to "increase its near monopoly."


De Grauwe On whether the European Union could fall apart right now:

"Not necessarily the European Union, but the euro zone, yes, which is part of the European Union is in really deep trouble. So many big mistakes have been made, and now the fragility of this whole system has been exacerbated. And there is a prospect that Cyprus will get out, yes."

On how Cyprus has completely upset the geopolitics of the developed world:

"Well, I guess the main reason is ineptitude of the policymakers. They allowed this crisis, which is a serious one, no doubt, to degenerate into a systemic crisis. But it is not the first time. We have seen the same thing with Greece, right? Greece is also not a very big country, a little bigger than Cyprus, and the same thing happened there. So in the case of Cyprus now, things could have been solved, but then European leaders insisted that deposit holders should also pay. Now, it sounds like a good idea in order to avoid that the German taxpayers have to pay. But if you do that you should tell the profit holders you are going to pay. Then, of course, you trigger possible reactions of panic elsewhere, and that has not been taken into account when decisions were made."

On what policy advice he would give the prime minister of Cyprus:

"Well, he has to make up his mind because, I think at the moment, up till recently, he was pursuing objectives that could not be square. I mean, on the one hand, he wanted to maintain a business model that involves essentially Mafia money being deposited in Cyprus, and that was a source of revenues for the Cypriot economy. And at the same time, he wanted to make sure that the deposit holders, the smaller deposit holders could maintain their money. And he couldn't really decide what to do."

"So I think what he should do now is to realize that the banks are broke, that some resolution is necessary, that deposit holders that have more than EUR100,000 deposits should pay because this was not ensured, and these are the Russians, right? And he should use - shoot for revenues that, if they are likely to come from gas and oil, to create future revenues and in such a way try to get a total package."

On how Russia fits into the equation:

"At this moment, it is the main supplier of gas to western Europe and, clearly, if Russia can get a hold on the gas in Cyprus or in the sea around Cyprus, it would just increase its near monopoly the supply of gas. So certainly, Western Europe should make sure that it doesn't happen, and western Europe and the euro zone have the financial clout to do so and should."

On whether he'd recommend that Angela Merkel should negotiate directly with Vladimir Putin and Dmitry Medvedev over the crisis in Cyprus:

"Well, I'm not sure that would be a good strategy. I think she should just go ahead instead of being defensive. She should go out to Cyprus, together with the rest of the euro zone, and make a deal and say we are going to set up an investment fund with you and the future proceeds of that will be part of the total package. But we should certainly avoid that the Russians take a hold. I don't think she has to go to Putin personally to do that."

On what he wants to see from the European elite to start turning around the Cyprus disaster:

"Well, surely we should be willing to fund it out. I mean, of course, there have been stupidities in Cyprus, but refusing to help them out would make things even worse. So we should set aside our concerns that taxpayers in Germany and the other countries are not - do not like this. We should, at some moment, if we are in a union, right, you have to help each other out. If you don't want to do that, you shouldn't be in the union."

On whether we're any closer to a shared sacrifice in Europe:

"No, not at all. We are farther away than ever. So one of the other problems that we face in Europe is that each time, in a particular country, banks are in trouble, the sovereign, the governments of that country, are also in trouble. And so the whole idea was to have a banking union so that we could cut this right, between the sovereign and the banks. And initiatives were taken last year to do that, but now we see the first time that, with a banking crisis, still the others are not willing to share in the cost."

On whether we are in a currency war:

"I think we are not yet in a real currency war. In the 1930s, you could say, yes, there was a real devaluation. Every country was devaluing and we all had to react. And I think we are quite far from this and I'm a little bit relaxed about this. Some countries, of course, are like the U.S., but there is also Japan now, more recently, has used a monetary weapon to bring down the currency. I'm not saying that there may not be a problem if everybody starts doing this. But up to now, I think the affect has been relatively limited."

On Ben Bernanke's performance:

"Well, I think he has done a good job. I mean certainly, if he had not done so, he had not taken the risk - because he took a risk in applying these unconventional measures and massive increase in liquidity - the U.S. economy would not be where it is now. It probably would be more like the United Kingdom or maybe even the euro zone countries. So in that sense, I would say, yes, he did a good job."

Audio here

bloomberg.com

Copyright © 2013 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in