terça-feira, setembro 18, 2012

... we need a commitment to joint external adjustments...

NO, unfortunately it is not correct to say that the "answer (to the Eurozone debt crisis) a commitment bugdet dicipline and strucutural reform" alone.  These are necessary but not sufficient condtions for saving not only the Single Currency, but more importantly, the Single Market. More critically, we need a committment to external adjustments, and to reducing intra-Eurozone CAB imbalances, by all trading partners,by the net exporters as well as the net importers.
WHAT, not who, must stand behind the Single Currency?
Balanced intra-Eurozone CAB current balance-of-payment accounts.
Further, we do need a banking union, not just to "backstop the banks", but to take over the function of prudential regulation which was so mismanaged by the net-creditor national central banks which allowed all that excessive cross-border "cheap credit" exposures to build up. Can't really blame the German banks though; they had to do something with all their "petrodollar"-type surplus deposits, and BASEL did say all European sovereign borrowers were risk-free.
The current European credit crisis may APPEAR existential, because it does imply the end of the credit-fueled illusion, but it is fundamentally still JUST a trade and balance-of-payment crisis, aggravagted by "banking-by-numbers", (im)prudent "home rule" regulation, and now by procastination and loss-avoidance.
YES, the structural reforms are essential, let's have Agenda 2010 for all. But the new fiscal treaty is based on another illusion, that overleveraged borrowers can reduce their external debt without sacrificing the overextended creditors. And THAT is why "the vision" is not believable.
Polarization of fortunes occurs between net exporters and net importers, not necessarily north/south. But this divergence eventually hits natural limits, to the extent that the net importers accumulate too much external debt and become mortgaged to the next exporters. The real problem is that the external adjustment burden is falling entirely on the borrowing countries of the Eurozone, through unilateral internal devaluations, without  being able to cut evenluxury imports.
It will either be a miracle ... or a disaster.
Believers can offer their prayers in Fatima ...
Mariana Abrantes de Sousa 
PPP Lusofonia