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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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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Germany Should End Austerity, Not Ireland

Anti-austerity fever is sweeping Europe as policy makers decide the way to get from crisis to growth involves higher spending. Well, not so fast.

The fever has already spread to the highest levels. At the International Monetary Fund’s recent spring meetings in Washington, IMF Managing Director Christine Lagarde and her deputy, David Lipton, repeatedly urged euro-area countries to focus on investment rather than budget cuts. Read more of this post

How to Kill a Banking Union the German Way

The most effective way to block any measure in the European Union is to say it requires a treaty change. This is the sucker punch German Finance Minister Wolfgang Schaeuble delivered at an April 13 meeting with his EU counterparts in Dublin.

According to Schaeuble, the EU can’t make more progress towards setting up a banking union within the existing EU treaties. Germany says that a treaty change is needed to properly separate the banking supervision and monetary policy sides of the European Central Bank, once the ECB takes over supervisory duties for all 17 euro area countries. Read more of this post

Cyprus Can Save Itself by Fleeing the Euro

Cypriots sitting in the cafes here on Nicosia’s Ledra Street are asking one another if there isn’t an alternative to their island’s bailout.

It has been just weeks since the series of rollercoaster negotiations that produced a deal to support Cyprus, in the process devastating its banks and economic prospects. After the initial shock, the reality of the agreement’s implications is sinking in.

The answer to their question is that there may be another way: Leaving the euro would be a better option for Cyprus if — and only if — it can secure cooperation from its troika of creditors: the International Monetary Fund, the European Commission and the European Central Bank. Read more of this post

Cyprus’ Four Options for Avoiding Collapse

The only thing worse than Cyprus accepting the rotten bailout program that European policy makers agreed on late last week was Cyprus rejecting it. Yesterday, the parliament voted decisively against the terms of the bailout, with 36 members opposing it, the ruling party abstaining and not a single vote in favor. Read more of this post

Euro Area Ruins its Progress with Cyprus Deal

There’s nothing like having part of your savings account confiscated overnight to make you feel that your money isn’t safe.

That’s what depositors in Cypriot banks awoke to on March 16, when they found their accounts frozen for at least five days to avoid panicked withdrawals. Read more of this post

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