As the focus of the euro crisis shifts to Italy, IMF head Christine Lagarde has warned that European leaders have less than three months to save the euro. Meanwhile top economist Nouriel Roubini has called on Berlin to drop its obsession with austerity, proposing that the German government give every household a 1,000 euro [$ 1,250 US equivalent] voucher to spend on a vacation in Southern Europe. Words: 990
So says an article* posted at Spiegel Online (www.spiegel.de)
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
The article goes on to say, in part:
As the clock ticks down to Greece’s crunch election on June 17, which is being seen as a referendum on the country’s membership of the euro zone, the warnings that European leaders need to act to prevent a collapse of the currency union are getting stronger by the day.
Lagarde: Euro Zone Has Less Than 3 Months to Get Is Act Together
Now, Christine Lagarde, head of the International Monetary Fund (IMF), has warned that the euro zone has less than three months to get its act together. In an interview broadcast on Monday evening, Lagarde told…CNN that action to save the euro is needed in “more shortly (sic) than three months.” She was referring to a recent prediction by billionaire investor George Soros that Europe has three months to save the euro….
Will Greece Leave the Euro Zone?
The IMF head declined to comment on whether Greece would leave the euro zone. “It’s going to be a question of political determination and drive,” she said. Many observers fear that Greece will have to return to the drachma if the left-wing anti-austerity Syriza party wins Sunday’s election.
Roubini: ‘Germany’s Obsession With Austerity Must End – Europe Needs Growth’
Top U.S. economist Nouriel Roubini has also reiterated his warning that time is running out. Pulling the plug on Greece will provoke the “total collapse” of the euro zone, he told the German mass-circulation daily Bild in an interview published Tuesday. If Greece collapses, many investors will panic, causing a run on the banks in Portugal, Spain and Italy, said the economist, who earned the nickname “Dr. Doom” by correctly predicting the U.S. subprime crisis.
Roubini said the “obsession with austerity” had to end, arguing that governments should lower taxes and raise wages. “Europe needs growth,” he said. He proposed that the German government should issue every German household a €1,000 ($ 1,250) travel voucher which is only valid for a vacation in the crisis-hit countries, in a bid to stimulate the local economies. He also suggested German should introduce tax breaks for people who buy vacation homes in Southern Europe.
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Roubini argued that European leaders should either take steps to keep Greece in the euro zone by helping it to build up its economy, as Germany did with the former East Germany after reunification, or provide for an orderly Greek departure from the currency union by extending Athens financial support. Both options would be cheaper for German taxpayers than letting the euro zone break up, he said.
Roubini & Ferguson: Future of Eurozone is in Germany’s Court
Roubini’s comments come in the wake of an essay that he co-wrote with Harvard historian Niall Ferguson, published in the Financial Times and SPIEGEL, in which the authors make clear that they consider the ball to be firmly in Germany’s court.
“Is it one minute to midnight in Europe?” they write. “The failure of German public opinion to grasp the dire state of affairs in Europe today is inviting a repeat of precisely the crisis of the mid-20th century that European integration was designed to avoid.” Germans, they write, “would do well to remember how a European banking crisis two years before 1933 contributed directly to the breakdown of democracy, not just in their own country, but right across the European continent.”
The authors argue that Germany’s prosperity is largely a result of the monetary union. “The euro has given German exporters a far more competitive exchange rate than the old deutsche mark would have and the rest of the euro zone remains the destination for 42 percent of German exports,” they argue. “Plunging half of that market into a new Depression can hardly be good for Germany.”
Italy Up Next?
Meanwhile, the focus of the euro crisis is shifting to Italy. Austrian Finance Minister Maria Fekter has suggested that Italy may also need a bailout. The country needs to get itself out of its debt crisis, she told Austrian television on Monday evening. She added, however, that Italy may need extra help, given the high interest rates it currently has to pay to borrow money. On Monday, yields on Italian 10-year bonds rose to the dangerously high level of 6 percent.
Italy, whose public debt is currently at 120 percent of gross domestic product, also announced on Monday that its economic output had shrunk by 0.8 percent in the first quarter of 2012, compared to the previous quarter. It was the strongest decline in three years and a bigger contraction than economists had been predicting.
Italian Industry Minister Corrado Passera has however dismissed speculation that Rome might ask for a bailout. He said on Monday that his country had already taken all the necessary steps to sort out its finances by itself.
No Relief from Pain in Spain
Meanwhile the relief over the banking bailout for Spain, which was announced on the weekend, already appears to have evaporated. A surge in stock markets on Monday faded within hours as investor anxiety about the euro crisis returned, with many observers concluding that the banking bailout for Spain would not be enough to fix Europe’s wider problems. Germany’s DAX stock market index closed on Monday with a plus of just 0.2 percent after large earlier gains were wiped out.
dgs — with wire reports
*http://www.spiegel.de/international/europe/imf-head-lagarde-warns-time-running-out-for-euro-zone-a-838368.html (To access the above article please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
The Markit PMI data from Europe shows still more deterioration led by France, Italy, and Spain. Let’s take a look at a few countries.
[The European Union] will collapse before the end of the year and very likely before the end of the summer. When this crisis hits it will be worse than 2008 and the world Central Banks will not be able to control the damage. What makes this time different are several items: [Let me explain]. Words: 1400
In every economic crisis there comes a moment of clarity. In Europe soon, millions of people will wake up to realize that the euro-as-we-know-it is gone. Economic chaos awaits them. [Let us explain why that is the case and how it will come about.] Words: 680
The media is rife with misrepresentations and analysis of the EU. Here’s the real deal, no BS situation with Europe – and its BAD! Words: 900
Introduction: “The crisis in the eurozone is the result of France’s persistent pursuit of the “European project,” the goal of political unification that began after World War II [with the hope] that a political union, a United States of Europe similar to America’s, would…prevent the types of conflict that had caused three major European wars…[and] also make Europe a power comparable to the United States, and thereby give France, with its sophisticated foreign service, an important role in European and world affairs.” [What went wrong and what does the future hold?]
Worries about an economic catastrophe in Europe are heating up again, and dramatic forecasts about doom are popping up everywhere. What’s important? How did we get here? Let’s put this all in perspective. Words: 2356
We still don’t have many political voices [in the European Union] that have the courage to say, ‘We’re headed for the rocks, and before we hit the rocks, let’s take a different course. Let’s try to break this thing up peaceably, before it ends in disaster….The establishment always supports the status quo…but actually, I think the only way we can avoid a depression is to break this (the EU) up.
I continue to see articles in the media claiming that Europe’s problems are solved. Either the folks writing these articles can’t do simple math, or they don’t bother actually reading any of the political news coming out of Europe [so let me present 3 data points that guarantee Europe will collapse at some point in the near future]. Words: 722
Europe may soon be choking on that plat du jour of government a la Hollandaise with the side of chopped Greek salad. The whole world, in fact, has got something like a giant hairball stuck in its craw. The hairball is composed of filaments of lies wound over a core of supernatural indebtedness. The lies are promises that the debt will be paid back. Words: 710
As many of you know, my primary forecast regarding Europe is that the EU will be broken up and/or collapse within the coming months. The reasons for this are financial, monetary and political in nature [with much of the latter dependant on what happens in Germany. Let me explain.] Words: 516
Europe is heading off a cliff! From one end of the continent to the other, the numbers suggest a double-dip recession is striking with brutal force…and with the world as interconnected as it is these days, what happens in Europe WILL impact our companies and markets here so now is the time to position your portfolio to weather the storm. Words: 900
The European economic situation is explained very simply in the illustration below. Take a look.
PARIS (Reuters) – There are signs that the economies of two of the world’s leading emerging powerhouses, India and China, are starting to falter, while Europe continues to be handicapped by its debt woes according to a recent report by the Organisation for Economic Co-operation and Development (OECD). [Here are some of the pertinent data.] Words: 250
Even as I write these words, the world’s largest economy — the E.U. — is coming unglued at the seams, the world’s second largest — the U.S. — is careening headlong toward a fiscal cliff that promises to gut its GDP, nearly all of Asia — including Japan, China and India — is slowing…and yet most investors still don’t get the message. [Let me go on to explain just what that message is.] Words: 1357
Given what is going on in the Eurozone – particularly with reference to Greece and Spain – but also with reference to France, Italy, Portugal, and the Netherlands, things seem to be increasingly spinning out of control. Should Greece exit the Eurozone there will most certainly be contagion issues arising which will be important to you whether you invest in the financial markets or not. Let’s take a look at them. Words: 502
I want you to understand the gravity of what Europe is facing; Europe has BET THE FARM and the croupier is about to roll the dice. We are all facing a momentous instant in time and all of the noise in the background is quelled by the showman announcing the main event. Let’s Roll! Words: 625
Spain is a catastrophe [of major proportions and] to fully understand [why that is the case] we need to understand Spain in the context of both the EU and the global financial system. [Once you read what I outline below you will more fully understand why] I believe that the EU in its current form is in its final chapters. Whether it’s through Spain imploding or Germany ultimately pulling out of the Euro, we’ve now reached the point of no return: the problems facing the EU (Spain and Italy) are too large to be bailed out! Words: 1345
In this article I lay out precisely why the coming Crisis in Europe will be THE Crisis I’ve been forecasting for the last 24 months, why it will have dire consequences on the U.S. and why the Fed can do absolutely nothing to stop it this time round. Words: 1334
When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival…[Let me explain this further by reviewing the 7 major problems facing the U.S. (and thus the world) and how they all will lead to problem #7 - devolution.] Words: 1520