Greek civil servants threatened on Monday to stage more strikes in protest at government austerity measures, heightening fears debt-laden members of the euro zone may struggle to deliver on promises to tackle stretched budgets. The euro was mired near 8-month lows against the dollar and the bonds of economically weak members of the 16-nation currency bloc remained under pressure as investors continued to fret about their ability to service their debt. In Spain, the government of Prime Minister Jose Luis Rodriguez Zapatero said it was sticking with a plan to raise the retirement age despite the threat of union protests there which would mark the end of a period of relative social harmony.
The euro was mired near 8-month lows against the dollar and the bonds of economically weak members of the 16-nation currency bloc remained under pressure as investors continued to fret about their ability to service their debt.
In Spain, the government of Prime Minister Jose Luis Rodriguez Zapatero said it was sticking with a plan to raise the retirement age despite the threat of union protests there which would mark the end of a period of relative social harmony.
A couple of points: first, Greece, which is making most of the headlines, is a tiny economy. So are Portugal and Ireland. The only sizable player among the countries in the news right now is Spain. (If Italy really gets caught up in the crisis, that will change).... Overall, the group of stressed economies account for about 20 percent of the eurozone's GDP. So even a sharp fiscal retrenchment wouldn't be all that big a shock; still, it certainly wouldn't help.
Yen, Dollar Decline on Speculation Europe Will Assist Greece The yen and dollar fell on speculation European officials will agree to assist Greece in tackling its fiscal deficit, reducing demand for the two currencies as a refuge. The euro rallied from near a year low versus the yen after a European Central Bank spokeswoman said President Jean-Claude Trichet will leave a central bankers' meeting in Sydney a day early, sparking optimism policy makers will help Greece address its fiscal woes. The yen declined for a third day against the dollar on speculation that Japanese companies sold the currency.
The yen and dollar fell on speculation European officials will agree to assist Greece in tackling its fiscal deficit, reducing demand for the two currencies as a refuge.
The euro rallied from near a year low versus the yen after a European Central Bank spokeswoman said President Jean-Claude Trichet will leave a central bankers' meeting in Sydney a day early, sparking optimism policy makers will help Greece address its fiscal woes. The yen declined for a third day against the dollar on speculation that Japanese companies sold the currency.
The US is essentially Washington and Wall St. The states and their populations are entirely peripheral. They could all go bankrupt locally, but as long as Washington still has tanks and Wall St still has bullies, thieves and rating agencies, the US will continue to appear solvent.
The EU is essentially everyone. Without a single centre of power or centre of finance - and neither Brussels nor the ECB count - this creates the perception of decentralised vulnerability.
The reality is that both Washington and Wall St are rigid and stupid to the point of smug catonia. They only appear solvent because of fraud and bluster.
Currently the plan is to talk down the Euro precisely because the dollar is getting its arse kicked, and both the Fed's and Wall St's finances are so precarious.
There's a small but non-zero chance this attack - and it's not a talking point, it's a deliberate economic attack - is going to backfire badly.
I suspect Greece will roll over on this one.
But there will be future attacks. And all that's needed to implode the dollar is one significant failure.
On the other hand:
Euro Falling, US Recovery Under Threat « The Baseline Scenario
Competitive depreciation is of course a no-no in international policy circles. But if your dissolute neighbors - with whom you happen to share a credit union - threaten to implode their debt rollovers, and makets react negatively, how can you be held responsible? Germany and France have no objection to euro depreciation - they are confident that the European Central Bank can prevent this from turning into inflation.
Competitive depreciation is of course a no-no in international policy circles. But if your dissolute neighbors - with whom you happen to share a credit union - threaten to implode their debt rollovers, and makets react negatively, how can you be held responsible?
Germany and France have no objection to euro depreciation - they are confident that the European Central Bank can prevent this from turning into inflation.
