Argentina’s Options: What happens after default?

Argentina is probably going to default tomorrow. An Argentinian debt default would clearly not be good for the country economically, but contagion would probably be limited and far less hard hitting than its previous 2001 default. If Argentina does default tomorrow, the biggest casualty would be the process of sovereign debt restructuring, which would become chaotic and haphazard. Read more of this post

Will the ECB’s Actions Be Enough?

As has been the case so many times during the Eurozone crisis, all eyes were on the European Central Bank (ECB) to intervene on June 5 following its executive board meeting. Eurozone inflation registered a paltry 0.5 percent in May, a problem for countries with high debt as it makes their debt burdens harder to stabilize.

ECB president Mario Draghi announced a series of measures in an attempt to reverse persistent low inflation. These measures were by the ECB’s standards bold; they would have been unthinkable even two years ago. Here are the three main actions the ECB took, and the possible outcomes of each:

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The Eurozone’s Imperfect Banking Union

In her first interview since becoming the head of the new Single Supervisory Mechanism (SSM) in Europe, Danièle Nouy talked a big game about letting European banks fail. Policymakers in Europe have been busy agreeing on a road map for how to save banks and, when necessary, how to resolve them. The progress that has been made on establishing a banking union was unthinkable only 12 months ago. However, the road map that policymakers have agreed to is flawed and fails to achieve the primary goals of banking union.

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How Germany Just Undercut the Euro

A German court may have just weakened European Central Bank President Mario Draghi’s most potent weapon in the battle to save the euro.

Back in July 2012, Draghi calmed panicked markets with a pledge to do “whatever it takes” to defend the euro and with a program, known as outright monetary transactions, to stabilize interest rates throughout the euro area by buying the bonds of financially distressed governments. The move was a game changer, shifting the crisis in Europe from acute to chronic. European markets have been relatively calm ever since. Read more of this post

Berlusconi Prepares a New Italian Drama

A political storm brewing in Italy has the potential to disrupt the calm that has prevailed in the euro area.

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Bulgarian Election Shows Need to Clean House

It looks as though the center-right Citizens for European Development party won Bulgaria’s early elections, the same party that triggered the vote by resigning from government amid protests in February. So has anything changed?

The short answer is yes. The elections show that Bulgarians have lost all faith in a corrupt elite, and the next government — whatever shape it takes — is likely to be weak and unstable. Read more of this post

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