domenica 30 maggio 2010

La fine dell'euro? Atene addio?

Fino al due giugno potete partecipare al sondaggio/dibattito sul futuro dell'euro promosso dall'Economist: la tesi del settimanale inglese è che alcuni paesi lasceranno l'euro entro 10 anni. Naturalmente gran parte della discussione si concentra sulla possibilità o meno che la Grecia superi la crisi in cui si trova senza abbandonare la moneta unica. L'abbandono dell'euro potrebbe permetterle una svalutazione competitiva, ma i sostenitori della permanenza dell'euro osservano che il debito si rivaluterebbe (essendo stato emesso in euro) tranne nel caso di un default che sarebbe meglio gestibile restando all'interno della moneta unica. Il merito del dibattito è di rendere assolutamente trasparente come la scelta sia "tra la padella e la brace". Voi cosa ne pensate?

Se volete un assaggio di come viene vista la crisi della zona euro dagli investitori americani potete leggere la lettera di John Mauldin di questa settimana. Ecco come si pronuncia sulla crisi greca e sulle ripercussioni nella zona euro e per le banche europee:

We all know that Greek government deficits are somewhere around 14%. But their trade deficit is running north of 10%. (By comparison, the US trade deficit is now about 4%.)
Going back to the equation, if Greece wants to reduce its fiscal deficit by 11% over the next three years, then either private debt must increase or the trade deficit must drop sharply. That's the accounting rules.
But here's the problem. Greece cannot devalue its currency. It is (for now) stuck with the euro. So, how can they make their products more competitive? How do they grow their way out of their problems? How do they become more productive relative to the rest of Europe and the world?
Barring some new productivity boost in olive oil and produce production, there is no easy way. Since the beginning of the euro, Germany has become some 30% more productive than Greece. Very roughly, that means it cost 30% more to produce the same amount of goods. That is why Greece imports $64 billion and exports $21 billion.
What needs to happen for Greece to become more competitive? Labor costs must fall by a lot. And not by just 10 or 15%. But if labor costs drop (deflation) then that means that taxes also drop. The government takes in less and GDP drops. The perverse situation is that the debt to GDP ratio gets worse even as they enact their austerity measures.
In short, Greek life styles are on the line. They are going to fall. They have no choice. They are going to willingly have to put themselves into a severe recession or more realistically a depression.
Just as British incomes relative to their competitors will fall, Greek labor costs must fall as well. But the problem for Greeks is that the costs they bear are still in euros.
It becomes a most vicious spiral. The more cuts they make, the less income there is to tax, which means less government revenue which means more cuts which mean, etc.
And the solution is to borrow more money they cannot at the end of the day hope to pay. All that is happening is that the day of reckoning is delayed in the hope for some miracle.
What are their choices? They can simply default on the debt. Stop making any payments. That means they cannot borrow any money, but it would go along way toward balancing the government budget. Government employees would need to take large pay cuts and there would be other large cuts in services. It would be a depression, but you work your way out of it. You are still in the euro and need to figure out how to become more competitive.
Or, you could take the austerity, downsize your labor costs and borrow more money which means even larger debt service in a few years. Private citizens can go into more debt. (Remember, we have to have our balance!) This is also a depression.
Finally, you could leave the euro and devalue like Britain is going to do. Very ugly scenario, as contracts are in euros. The legal bills would go forever.
There are no good choices for the Greeks. No easy way. And then you wonder why people worry about contagion to Portugal and Spain?
I see that hand asking a question. Since the euro is falling won't that make Greece more competitive? The answer is yes and no. Yes, relative to the dollar and a lot of emerging market currencies. No to the rest of Europe, which are their main trade partners. A falling euro just makes economic export power Germany and the other northern countries even more competitive.
Europe as a whole has a small trade surplus. But the bulk of it comes from a few countries. For Greece to reduce their trade deficit is a very large life style change.
Germany is basically saying you should be like us. And everyone wants to be. Just not everyone can.
Every country cannot run a trade surplus. Someone has to buy. But the prescription that politicians want is for fiscal austerity and trade surpluses, at least for European countries. But if the PIIGS reduce their trade deficits, that will not be good for Germany.
Yet politicians want to believe that somehow we all can run surpluses, at least in their country. We can balance the budgets. We can reduce our debts. We all want to believe in that mythical Lake Woebegone, where all the kids are above average. Sadly, it just isn't possible for everyone to have a happy ending.
And this brings us to a last quick point, which some day will be its own letter. Every country wants it currency to be valued "fairly" which means lower than its competitors. With both Europe and Britain on their way to parity with the US dollar, what will be the reaction of Asia and especially China?
As Ollie said to Stan (Laurel and Hardy), "Here's another nice mess you've gotten me into!" A nice mess indeed.
Should the US Bail Out European Banks?
The obvious answer to the above question, at least on this side of the Atlantic, is no. But that is the plan being foisted on US tax-payers by the International Monetary Fund. The IMF wants to create a $250 billion dollar bailout fund for Greece, Portugal, et al that the US will contribute roughly 20% to. This fund will loan money and that IMG debt will be subordinate (junior!) to regular Greek debt, so when Greece does default, and they will, the IMF is the last in line to get paid.
Where will the money go? It will buy mostly Greek rollover debt from European banks getting out of their Greek debt. It is a back door bailout for German and French banks. The US Senate voted 94-0 that the US should not fund any such debt if the Treasury cannot certify the probability of getting repayment. If the Obama administration allows this funding to go through, the hue and cry will be large. It is bad enough that we have to pay for Freddie and Fannie (already $400 billion and counting!). Not meaning to be churlish, but the French and Germans can bail out their own banks.

Se pensate che siano solo gli americani a essere pessimisti potete leggere l'ultimo editoriale di Martin Wolf: dopo la cicala e la formica di un paio di giorni fa è il momento di Father and son: 

What triggered this aftershock was the revelation that Greece had lied about its fiscal position, followed by the inability of the eurozone to respond: Germans were outraged at the idea that they should rescue irresponsible profligates; others thought the Germans inflexible bullies. So the Europeans made the same mistake as the Americans had made when responding to financial worries: they let the crisis get ahead of them.”
“But they bailed out Greece,” said the boy. “So why all the turbulence?”
“The big point is that investors are not altogether stupid: they know these are temporary patches; they know Greek indebtedness is going to worsen; they know that other countries in peripheral Europe will find it hard to grow out of their plight; they know that solidarity among eurozone member countries is fraying; they knowGermans are very angry; and they know that inadequately capitalised banks are vulnerable to sovereign risks. All this makes the euro seem a worse bet. So it has fallen in value.”
“I understand that,” replied Bobby. “But won’t that help the eurozone?”
“Yes,” agreed his father. “But it will worsen prospects elsewhere – in the UK and US, for example. And then there’s the worry that these countries have huge fiscal difficulties, too. The markets don’t seem to mind now. But they might change their view. Worse, they don’t know what to fear: will it end up in deflation, default, inflation, financial shocks, or all of these? Markets are unpredictable, like children.”
Bobby decided not to respond to this teasing. “So,” he asked thoughtfully, “what’s going to happen next?”
“If I knew that, I wouldn’t be a mere economic journalist,” his father said.
Bobby smiled: a familiar remark.
His father did not notice. “Maybe, the momentum gained by the US and the big emerging markets, especially China, will let the world ride through the shocks. The OECD calls the outlook ‘moderately encouraging’.
“Alternatively, you could argue that the massive fiscal deficits are unsustainable and that attempts to rein them in, in the eurozone and UK, are going to cause renewed recession and political strife. We have also barely begun reducing private debts, which will take years. The banks are far too big and have too many doubtful assets on their books. Meanwhile, emerging countries are too small and weak to be locomotives for the world. Some people worry that China is overheating or suffering from huge asset price bubbles, too, though I disagree. And then there is geopolitical uncertainty over North Korea and Iran. In short, markets are volatile because of all the uncertainty out there.”
Bobby was beginning to find this familiar: his father tended to see the gloomy side. But he could be wrong, as his mother enjoyed pointing out.
“Anyway,” concluded his father, “these aftershocks are likely to go on for years, with fiscal worries undermining confidence in the financial sector and back again. It will affect you, too: western governments are going to be short of money for decades. It’s going to be miserable. But you can learn Chinese and go east.”
Bobby groaned. It sounded like hard work. But he went off quietly to bed. What nightmares disturbed him?
Infine non mi sono sorpreso troppo scoprendo che c'è chi contesta lo status di guru raggiunto da Nouriel Roubini  ma io continuo a trovarlo uno degli economisti più interessanti da leggere e da ascoltare.

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