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Sunday, May 2, 2010

RGE Arnab Das on Greece The Eurozone and the domino effect

"The crisis in Greece will be exacerbated in the short and the spread will increase with the Bund. The market will continue to test the commitment greek, when there will be full of serious Athens, the spreads decrease. In the background there is another problem: the problem of competitiveness. In recent years the local economy has not grown much and has not been made structural reforms to ensure flexibility in the economy, necessary since exchange rates are fixed. Even Ireland is in crisis, but at least for a decade had grown more in the world. You should also consider Germany, after reunification has faced deflation painful but necessary. Today can not say to Greece: we grant you a discount. "Arnab Das on the Italian Paper Il Giornale
"Monetary union does not include an exit strategy. If Greece were to leave, the debt should rename the new drachma rates skyrocketing. There would be chaos. And then a domino effect: other countries end up under pressure. Would risk a crisis similar to that of Lehman. But to Athens for the euro is just one battle, the war is not yet won. "
"History shows that monetary union is no life without political unity and tax. It may be that the euro is the exception, but only if countries continue to meet Maastricht. Even California is bankrupt, and California weigh much more than Greece, but is not a sovereign state and the federal government can relieve it by transferring funds. The Eurozone rather not have this flexibility. So the crisis in Greece is highlighting the limits of the euro. "

Source Il Giornale