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Eurointelligence Daily Briefing: Portugal brags about EFSF terms
José  Sócrates agrees €78bn EFSF programme; deal includes a softer deficit reduction trajectory;interest rate to be decided May 16; Sócrates claims he got a better deal than the Greeks and the Irish (which will no doubt lead to calls for a renegotiation of existing programmes); he also brags that there will be no additional pain in 2011; the troika forecasts a 2% contraction of the Portuguese economy this year; Jyrki Katainen is optimistic that he could gain a parliamentary mandate allowing him to support the Portuguese programme; Michael Noonan says Ireland is solvent due to current account surplus; Bank of Spain gives cautious outlook in its latest Financial Stability Report; Nicolas Sarkozy plans to focus his re-election campaign on fiscal rigour, as his advisers talk of a possible ratings downgrade; Wolfgang Schäuble's budget plan will be saved through much higher revenues from a booming economy; ECB fails to sterilise bond purchases yet again; Martin Wolf, meanwhile, argues that the eurozone faces a choice between permanent pro-cyclical adjustments, a break-up; or closer
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Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed May 4th, 2011 at 04:00:41 AM EST
Eurointelligence: Portugal brags about EFSF terms
Martin Wolf on the eurozone

An interesting column by Martin Wolf on the eurozone, based on a paper written by Paul de Grauwe. He starts by noting that Spain's real interest rate is double that of the UK, which is entirely due to its membership of a monetary union. The ECB supports the banking system, but acts like the IMF: it wants its money back. There are three possible outcomes to the crisis. The first is a fall-back to the gold standard, with its pro-cyclical policies, which will be as unacceptable to European today, as it was in the past. The second will be a break-up, a concentration of the eurozone around countries similar to Germany. And the third will be deeper integration. He predicts they will choose the latter, but it is a political choice.

Since the Euro is being run as if it were already on the gold standard, I predict the first option will be chosen since we're already there.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed May 4th, 2011 at 04:17:53 AM EST
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