euro crisis

How to Measure Success in the Eurozone?

How to Measure Success in the Eurozone?

Earlier in the year, many were speculating the Euro was a risk of breaking up. Up step Mario Draghi with his promise to ‘save the Euro whatever it takes’ Under Mario Draghi, the ECB have done two things to help reassure bond markets: Long term refinancing for banks – helping to avoid liquidity crisis in banks spilling over into sovereign debt crisis. Outright monetary transactions – the willingness to buy an unlimited amount of  bonds (in exchange for a country implementing strict fiscal rules) These policies have helped see bond yield differentials narrow,…

Improvements in Eurozone Competitiveness

Improvements in Eurozone Competitiveness

In the lead up to the Euro debt crisis, there was a marked divergence in competitiveness within the Eurozone. In fact, some economists suggested that the currency imbalances were the root cause of the Eurozone fiscal crisis. (VOX article) However, recent evidence suggests some restoration of competitiveness within the Eurozone. We can examine competitiveness in a couple of ways. To see the divergence in competitiveness,  we can look at unit labour costs. Relative to Germany, unit costs tended to rise much faster in southern Europe.  The graph below shows the…

Portugal Economic Crisis

Portugal Economic Crisis

In the past few years, the Portuguese economy has suffered a deep recession and rising unemployment. The outlook for 2013 is also grim, with the government proposing more tax increases and spending cuts in an effort to meet deficit reduction targets. What caused the Portuguese economic crisis? In the period Q4 2o10 to Q4 2012, the Portugese economy has declined over 5.3% Portugal Unemployment With the rapid drop in real GDP,…

Is the French Economy at Risk?

Is the French Economy at Risk?

The French are not too happy. The rating agency Moody have stripped France of their triple AAA rating – downgrading French debt to AA. It probably wouldn’t be so bad, but their English neighbours still retain a AAA rating, despite having a much higher budget deficit. As the English would say, that’s just not cricket. To rub salt into the wounds, the Economist recently ran a cover with several baguettes wrapped around with a lit fuse ready to explode – The French economy on slow road…