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Lisboa, Portugal
Nasci no dia 11 de Junho de 1964 na cidade da Beira, MOÇAMBIQUE.

A Estação dos CFM, Beira

A Estação dos CFM, Beira
Ex-libris da cidade, 1966

The Euro, as a single currency, should be abolished

Another black and white motion statement leaving me no option but to choose No.
While I agree to the first part I am not prepared to contemplate the idea that the Euro should get abolished.
Abolished? Then what?
All 17 countries now sharing the single currency would revert back to their old monies?
Or a new version of yesteryear's currencies?

Simplistic as I made it out to be packed in a few odd questions, every single serious economic, financial and social consequence is inextricably wrapped up within each.
That is where the stakes are high enough to ensure that the Euro is given a new lease on life.
It calls for closer European integration.
What form and shape this will take is for policymakers and far-sighted politicians to grasp and propose.

It would seem to me that the Euro has many underlying strengths but will not - contrary to the founder's beliefs - assure convergence between all the economies it services. How could it?
The divide has been felt acutely lately (1-2 years) the logical consequence of relevant economic under-performance among member-countries.

There has obviously got to be a political solution rooted in realistic economic fundamentals.
The road traveled so far proved artificially smooth during the first 10 years I dare say but unsurprisingly very bumpy in the last 1-2.
It could not have been otherwise given the structural differences setting these countries apart. And excessive spending pursued mostly by a few Southern European States who could not see beyond the present.
Adherence to the Maastricht criteria never again seemed to be taken seriously once countries landed themselves inside the Euro club. Not to mention Greece that never fulfilled the criteria in the first place or ever bothered to balance its books.

Very disappointing to admit but the Euro Zone is indeed right in the middle of a storm testing its main crews to the limit.
The latest summit decisions seem to indicate that where there is a will there is a way.
It may have just been one first small step in the right direction.

The specifics are very hard to work on.
Yet it would seem to me that the 17-member Euro Zone and the larger EU can hardly afford shooting down the Euro.
The broader picture needs to come into full view.
An hypothetical demise of the single currency would deal another severe blow to Europe's economic fortunes.
Its relative decline vis-a-vis the rest of the world would get a further boost.

I do not like misplaced calls for solidarity from Southerners but would rather see the stronger half of the dividing line realize where their medium-to-long interest lies.
To that end many balances across the Euro Zone need to be restored at the earliest.

Europe agrees a "shock and awe" bailout for Greece

A rescue package of epic proportions, epic challenges for the Greek government and people, epic uncertainties and epic stakes for the single-currency.

It was the Euro's defence that ultimately forced politicians from Germany to Malta to perform a hard balancing act whose overall success is far from assured.Each finance minister has enough reasons to fret and grumble about.It being the Euro as a common currency, because of Greece despite Greece.
Up to now every 'least damaging' approach failed miserably to cool down the financial markets that remained as unimpressed as ever throughout.
For its part Greece is effectively the main winner in this high-finance gamble.The country bought time the markets were not willing to give it once confidence vanished.Precious time desperately needed to restore credibility and good governance at home.
A daunting internal fix with daunting external implications.
Three full years is what the government and Greek society top-down and bottom-up now have to set the record straight in so many ways.
Literally and figuratively.

For the other 15 Eurozone countries - each facing own troubles to varying degrees - keeping fingers crossed would be mild to describe the monitoring of Greece's performance over the coming 36 months.Potentially they are all losers, starting out by losing simply to avoid bigger losses!
There are so many relevant questions that might be asked to which full answers ought to be provided.
They won't get asked or get answered.
Tellingly, each and every single one of them would now seem rhetorical or at best an exercise for academia.

The spectre that haunts Europe

I am still hopeful that Greece will not require a bail-out in whatever form pinning my hopes on the PM's own words.

He did sound very bold and brave in the face of such overwhelming odds but until a deal is actually in place I would rather believe the Greeks can and will take care of themselves.

My stance is wholly based not on immediate needs triggered by the Western financial meltdown that led to the economic downturn.This in turn led to a collapse in tax revenues across countries caused by economies shrinking badly.

To a large extent Greece is indeed a one-off case-study for the worst reasons, its latest fiscal deficit the sum total of profligate spending, widespread cultural-rooted tax evasion, underbudgeting, creative accounting, weak notion of public service and duty, etc - all conspiring over decades to bring the country to the brink of bankruptcy.

I am sure many Greeks will have seen it coming and warned their governments in years past.To no avail as even the present government was elected as recently as late 2009 on a platform to increase spending.

According to EMU rules public finances were clearly to remain national responsibilities.A considerable chunk of sovereignty for States to manage through their democratically-elected governments of the day.
Would the Greeks have liked their Finance Ministry to be ruled or dictated to from Brussels or Frankfurt just so the Maastricht-agreed criteria could not have been so despondently ignored?

Current turmoil is the Euro's hardest test ever but one that will also represent a defining moment in the single-currency's future.

It is a fact that Southern European countries are faced with similar issues though not on the same scale and urgency.Others in Northern Europe, the US and Japan also recorded their biggest fiscal deficits and added up noticeably to their debts in 2009.
Each one has its own track-record, however.
This is exactly what sets Greece apart from the rest.
Each country is unique in its own way, there being obviously overlapping between them.

International rating agencies must make the effort to closely monitor and register those differences and then advise financial markets.

After all it is sovereign countries and sovereign debt one is dealing with.

There is much more at stake than strictly soulless bundling of nations.

Arquivo do blogue

terça-feira, 23 de julho de 2013

TEc - In the dumps - Portugal's plight as I see it, replying to a fellow reader

Economic policy is about striking the right balances - macro and micro - that ultimately provide sound and sustainable growth in a given economy.
As it is there are enough uncontrollable variables beyond reach of any government. This makes it all the more pressing for governments to manage public accounts responsibly.
They owe it to their citizens/taxpayers first and foremost.
Having witnessed the full picture unfold over many years, a close look at the relevant graphs and data gives us the background to the current troubles.
While I agree with you on many points, I also know Portugal's financing needs ratcheted up to a level that became untenable.
Furthermore, the debt piled up to keep the State running and finance non-productive investment - broadly speaking.
It did not go into wealth drivers that might eventually produce returns to help pay the interest on it.
Basically, the trendlines were set upwards while the economy staggered never to show to really benefit from high levels of State spending.
The current administration has had to cope with a country on the brink. The bail-out programme is evidence enough of just how serious the situation had become once financial markets pushed interest rates over and above the 7% threshold.

A country's economy cannot be fired up overnight.
Least of all by government decree or goodwill gestures. Or wishful thinking.

It takes proper planning of national priority investments, good government that frees up private initiative and provides an environment conducive to FDI flows, etc.
Now taxation levels are excessively high choking companies and individuals, turning away foreign investors.
The time is ripe targeting growth as an absolute priority while not losing sight of fundamental balances.
Last but not least, I wish I could agree with you on the wrong premises...

segunda-feira, 22 de julho de 2013

TEc - In the dumps - Portugal's dire straits

My comment will dwell on Portugal only as Greece is relatively out of bounds.I know not, detailed enough, the intricacies of its internal set-up.
Besides, it is too painful to watch the two countries banded together, apparently(?) following similar paths with a time lag.
With an economy in tatters, an exhausted debt capability and a fledgling financial position into the near future one wonders how top politicians still jostle incessantly to reap some immediate short-lived benefit.
Portugal is caught between a rock and a (very) hard place having played itself into the hands of financial markets simply to keep the State going. Unable to generate tax revenue large enough to meet its insatiable needs, the Portuguese State now faces slimmed-down renewal or quick demise in the current format size.

Much is said about the lack of strong and purposeful leadership to carry out long overdue reform.
I would rather say no non-sense good government.
The more it is talked about the less likely it seems to get done.
Some have long claimed the State is unreformable. They might well be right.
If current circumstances do not make reform mandatory, whatever will?
Regardless of short-term obligations and financing requirements the underlying issue remains the economy.
Wealth creation by digging into every material and intellectual resource available that will eventually set Portugal on a sounder footing.
Balances to the country's external accounts have been forcefully restored thanks mainly to the collapse in internal demand and economic activity in general.

Much harder, or the major structural challenge, will be to keep those balances once the economy finally starts to grow.

Reply to a comment by a fellow reader:

I'm definitely not going to be drawn into a play with words.
Anyway, 'now'(in the context) is meant as the point in time when it became obvious State expenditure was growing much faster than paltry economic growth for a full decade at least.
If State spending balloons over many years without the economy matching up then external financing is the only option to fill the gap, i.e. as long as there are interested parties to buy debt.
Budget deficits recur year on year to unmanageable levels, get thrown on to the country's public debt until the debt load itself becomes unsustainable.
Please figure out 'insatiable' in the context.

terça-feira, 16 de julho de 2013

TEc - Rewarding work - On pay gaps around the world

This will always be sensitive territory raising more questions than there are answers.
However, the more unequal a society, the poorer a country by per capita GDP at PPP, the wider the gap in pay. There are exceptions to this general rule. South Asia is a good case in point if perks and side-deals are not accounted for.

In other words factual evidence shows that poorer States tend to reward their lawmakers lavishly even in absolute terms. On relative terms it becomes strikingly obnoxious to begin to comment.
The worst part is there is no fix to these gross imbalances produced by those with power to satisfy their own notion of payscales.
They have it on their grounds regardless.

At the opposite end affluent societies show much greater balance across the board.
Lawmakers' pay is but a reflection of this.

terça-feira, 9 de julho de 2013

TEc - On the rocks - Portugal's political infighting set against its severe ongoing economic and financial troubles

"The politicians fiddle while the country burns" is a phrase read many years ago that I now borrow to best describe Portugal's current predicament.
Literally, summer forest fires aside, Portugal is faced with scorching challenges akin to a gutted wasteland.
From the very core of the governing center-right coalition nothing short of implosion took place in the early days of July. First the hitherto all-powerful Finance Minister resigned followed by the Foreign Minister - and leader of the coalition's junior partner - the very next day while the former's substitute was being sworn in. Strains and cracks had always been present as might be expected of a government so forcefully externally constrained. And a people constantly jolted by endless austerity, subjected to never-ending economic and psychological duress.
Portugal's political leadership and much of the country's other leaderships are clearly at a loss finding pathways to future collective prosperity.
In good times as in bad they never could or would see beyond the issues of the day.