The Lehmann
Letter (SM)
Here’s the nub of the European crisis: Can northern Europe and
southern Europe agree on the conditions under which the north bails out the
south?
Below the
link is an upbeat passage that appears near the end of an article in today’s
New York Times entitled:
Euro Zone Is Lurching to a Crossroad
“Some experts said … that it would be a mistake to underestimate
European resolve about ramming through unifying measures like euro bonds and
tighter common control of national budgets — especially when the prospect for
not doing so looks so dire.”
That looks encouraging, but it followed these paragraphhs:
“As Spain’s economic crisis deepens and uncertainty swirls over
Greece’s future in the euro zone, the guardians of the increasingly fragile
European monetary union are near a moment of truth: Can they muster the will
and resources to keep the euro zone from breaking apart?....
“Over the weekend, leaders of two of the euro’s most vulnerable
countries rallied to the cry of more unification. Mario Monti of Italy called
for using euro bonds to create a quicker path to common debt for Europe. And Mariano
Rajoy of Spain floated the idea of a common fiscal authority in Europe to
synchronize budgets and manage debts…..
“Integration, in the form
of banking and fiscal unions, would take time, of course, although policy
makers are pushing harder than ever on these fronts. As for short-term measures
that countries like Spain are pushing for, namely to get Europe to provide
money for its banks or buy its bonds in bulk, these steps would require
sacrifices that Spain seems in no mood to make. ….
“It is the nub of the euro
zone’s existential quandary: how to get taxpayers in northern creditor
countries like Germany to provide funds to countries like Greece and Spain that
are unwilling to accept the loss of sovereign control over their banks and
budgets that would be the consequence of such assistance. …
“Germany, however, has no desire to swallow the bill for Spain’s
bad banks, so it is insisting that funds be disbursed to the Spanish government
and that strings be attached. It wants more draconian spending cuts and perhaps
even losses for the mostly Spanish investors who hold the stocks and bonds of
these failed banks.….”
But as Berlin and Brussels butt heads with Madrid over who pays
what, when and how, money continues to flee Spain at an alarming rate….”
This letter continues to believe that Europe can reach agreement
to end the crisis, but negotiating that agreement is a struggle.
(To be
fully informed visit http://www.beyourowneconomist.com/)
© 2012
Michael B. Lehmann
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