More on the imminent collapse of the Euro (and implications for the US) from Paul Krugman

[woo me with science]

An Impeccable Disaster
By PAUL KRUGMAN
Published: September 11, 2011

....
Financial turmoil in Europe is no longer a problem of small, peripheral economies like Greece. What’s under way right now is a full-scale market run on the much larger economies of Spain and Italy. At this point countries in crisis account for about a third of the euro area’s G.D.P., so the common European currency itself is under existential threat.
....
I’ve complained a lot about the “fiscalization” of economic discourse here in America, the way in which a premature focus on budget deficits turned Washington’s attention away from the ongoing jobs disaster. But we’re not unique in that respect, and in fact the Europeans have been much, much worse.
....
And now it’s all coming to a head. We’re not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer.

So will the E.C.B. do what needs to be done — lend freely and cut rates? Or will European leaders remain too focused on punishing debtors to save themselves? The whole world is watching.

[WilmywoodNCparalegal]

1. Why is everyone in the U.S. hoping that European economies will fail?

Is it based on fact or actual speculation??? Because certainly papers in my native country (Italy) are surely not hinting at anything this disastrous. I'm referring to center-left papers, not Berlusconi's toilet papers, such as La Repubblica.

I wonder if this is another rumors-that-become-self-fulfilling-prophecy issue? Paul Krugman mentions Europenas have been much worse. Really? At least they have free health care and schools as well as generous unemployment benefits. I guess that is all relative.

But I'm kinda getting sick of this anti-Europe and/or wishing Europe to fail, because it would benefit the U.S.

[totodeinhere]

4. I didn't get the impression from the article that Krugman "wants" European economies to fail.

He is worried that they might fail but that is not the same thing as wanting it. And Krugman has been in the forefront of advocating that we adopt better social welfare as they have in much of Europe. So at least when it comes to Krugman I think your criticisms are off base.

[bemildred]

7. I, for one, live in the USA, and do not hope European economies fail.

I would much prefer that they nationalize the banks and repair their economies..

[jwirr]

9. I think he is talking about the banking issues not Health care, etc.

When he says worse he may be referring to the austerity plans that are straight out of Milton Friedman's Chicago School ideas. In this country it is mostly the rethugs who are calling for austerity. Austerity is not going to fix anything.

I also do not see Krugman cheering for EU to fail. He is saying that any failure will be felt world wide. Not a good thing.

As to Italian papers talking about this - neither are most of ours. Today the leaders of the world prefer to keep the people in the dark.

[JHB]

10. You are correct...

This is about banking- and fiscal policy, and the wrong-headedness about the austerity policies being pushed by the Very Serious People responsible for overseeing EU economic policies. It's not about health care, except for how austerity measures will cut back on care and other benefits for the general public.

[Frustratedlady]

2. This morning, after reading several gloom and doom reports...

I pulled what little I had in the market and placed it into a safer, guaranteed savings account. I'm too old to ride that roller coaster anymore. When things settle down, I'll get on again, but the world is too unstable for my nerves to watch and not react.

Call me chicken.

[totodeinhere]

6. I hear you but if things really fall apart then your "safer, guaranteed savings account" might

not be so safe after all. In a total meltdown the FDIC might not have enough assets to cover everybody and the teabaggers in Congress might not want to bail it out. I have thought about investing in gold but gold could crash at any time as well. I just don't know what to do.

[WinkyDink]

3. The entire "Euro zone" concept was ill-advised and hence, doomed from the git-go. It has brought

cultural upheavals to the point of destruction.

[woo me with science]

5. And yet the solutions being proposed are in the direction of MORE economic integration

and away from sovereign national currencies that would allow countries to print money and protect themselves from the banks.



http://money.cnn.com/2011/09/08/markets/europe_debt_crisis_

Europe's debt crisis: 5 things you need to know
By Ben Rooney September 12, 2011: 8:05 AM ET

....
The crisis has brought to light problems that many analysts say will require a fundamental change in the way the European Union operates.

The eurozone nations have enjoyed the benefits of a shared currency and uniform monetary policy since about 1999. However, aside from certain unenforced budget targets, the group has never had a common approach to fiscal policy.
....
European leaders have said repeatedly that they will do whatever it takes to preserve the euro, arguing that greater economic integration is the key to doing so.

Last month, French President Nicolas Sarkozy and German Chancellor Angela Merkel met in Paris to discuss, among other things, a proposed "golden rule" to require all euro area nations to commit to balanced budgets.

The goal, they said, is to promote greater "convergence" among the policies of the core members of the EU, such as France and Germany, with those of the more troubled nations on the union's periphery.

The leaders also discussed greater coordination on corporate tax rates and the creation of a so-called financial transaction tax.

But officials have so far stopped short of explicitly calling for a uniform fiscal authority.

Investors have been calling for the creation of a so-called Eurobond, which would be backed by all 17 euro area nations. Issuing a common form of debt would ease borrowing costs for the weaker members of the union....But it would result in higher rates for more credit-worthy nations, which are opposed to the idea.

[Safetykitten]

8. Kinda sounds familiar huh? Asking the problem for suggestions.

[hfojvt]

11. they didn't have a shared currency in 1999

I visited in May 2001 and still got Deutschemarks and Dutch kroners. I was going to try to get some Euros in Frankfurt (as I was headed to Amsterdam) but the line was too long, and too slow.

[muriel_volestrangler]

13. The exchange rates between the old currencies and the euro were fixed at the start of 1999

see http://en.wikipedia.org/wiki/Euro . While the euro notes and coins didn't come in until later, the rates of all the currencies between themselves and the euro, which came into existence for accounting purposes then, were fixed. So the currency was effectively shared.

[pampango]

12. It's split. There's a nationalist right (break up the euro and EU) and an internationist left

(more European integration). The European left believes that keeping the bloc united is a better way to control big banks and multinationals than having each of the 27 countries stand up to them individually.

http://seekingalpha.com/article/292272-could-germany-s-left-save-the-euro-and-europe

Conventional wisdom holds that most Europeans don't like the EU, and that the euro is doomed. But that view is based on American political assumptions about left and right, and a belief that Europeans will always vote for nationalistic conservatives -- and it's not true. Angela Merkel's Christian Democrats are under enormous, and increasing, pressure from the Social Democrats and Greens, both of which are on record as supporting eurobonds and greater European integration.

But the biggest supporters of the eurobond concept are the left-wing parties, and support for both of them – most especially the Greens – is rising. It's the German right that is in court against the Greek bailout, and they're losing – both in the courts and with public opinion.

This is something The Wall Street Journal fails to grasp, even while acknowledging that the German Left is pro-Europe, and that its support keeps rising. While American politics are assumed to be based on either spending or not spending, or on a choice between domestic and military spending, European politics don't line up that way. There it's more of an internationalist left and a nationalist right, a pro-Europe left and a Euro-skeptical right.

What people across Europe seem to be voting for, in other words, is what the bankers want -- a permanent solution that controls spending and deficits across the continent, a unified fiscal policy, a truly united economy. What makes American heads spin is that this means they're voting for the left.