Euro

What we are seeing now is a continent barely held together by the monetary alchemy of its central bank. But you have to hand it to the ECB: it has developed extraordinary skills in concealing the real nature of its actions. No other central bank could so beautifully camouflage subsidies to banks and governments as help to the private sector.

What may look like the euro’s strength is not quite what it seems. The eurozone remains as fragmented as ever, and neither Draghi’s words nor any real actions of his central bank will make a difference to this basic problem. The only way to tackle it would be a departure of some members from monetary union.

In that faraway wonderland that it is the eurozone, nothing is quite what it seems. It is a strange place where half-bankrupt governments can plan a return to capital markets at moderate yields, and a central bank is able to impress analysts by talking about things it cannot do. Both instances are patently absurd, but just because something is absurd has never stopped it from happening in Europe.

Published in Business Spectator (Melbourne), 3 April 2014 By all measures, it was a defeat of historic proportions for President François Hollande and his Socialist Party. Last weekend’s French local elections have turned the country upside down, or rather shifted it to the political right. It is also a reminder that of all the time bombs […]

As government debt in the European periphery becomes a riskier investment, the yields on periphery government yields are not going up as one might expect. On the contrary: they are falling.

Admittedly, judgements by the German constitutional court can sometimes be hard to understand. Last week’s ruling to pass on the matter of the European Central Bank’s bond purchases to the European Court of Justice is no exception. It is certainly a decision that is easy to misinterpret.

The Bundesbank has put forward its own proposal on how to deal with acute debt crises in the future. On closer inspection, it is plain to see that the Germans are as orthodox as ever.

The illusions of Germany’s alleged role as a strong, prudent and efficient anchor of the eurozone will be harder to maintain in the future. The country is no economic superman, and there are numerous economic problems boiling under the surface.