The recession pounds Europe

But the old continent’s banks should hold up better than most


The financial meltdown that sparked the global recession might have arrived with a Made in the U.S.A. sticker, but, as this comprehensive feature article shows, Europe is feeling a full measure of pain. The symptoms vary, though. Consumers won’t spend in France, exports have tanked in Germany, real estate bubbles have popped in Britain and Spain. And bad times underline flawed institutions: the EU needs a single securities regulator “rather than the tangle of national bodies it currently has” (sound familiar?). On the other hand, cautious European banks—except in previously high-flying Britain and Ireland—should recover faster than battered American lenders.


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The recession pounds Europe

  1. I guess, as always, that it depends of who/what you read. I am big fan of Ambrose Evans-Pritchard at The Telegraph and he’s not nearly as sanguine about future of euro/banks as others are.

    He posted some thoughts yesterday on his blog with the title Are Germans Giving Up On The Euro:

    “Ex-Bundesbank chief Karl Otto Pohl has just said that Ireland and Greece are in danger of defaulting on their sovereign debts and/or may be forced out of the Euro, for those who may not be aware of his Sky interview by my colleague Jeff Randall.

    “I think there are countries considering the possibility. It would be very expensive,” he said. “The exchange rate would go down, 50 or 60% and then interest rates would go sky high because the markets would lose all confidence.”

    Professor Pohl said Germany’s political class is afraid their country will ultimately have to pay for the EMU mess. His view is that the burden should be shifted to the IMF (ie. the US, Canada, Japan, Britain). Thanks a lot Karl Otto. You broke it, you fix it.

    This is more or less what ex-foreign minister Joschka Fischer has been saying in London over the last two days, although his main point is that Russia is now the equivalent of Germany in the 1930s: an embittered nation with a revanchist and dysfunctional leadership class.

    Mr Fischer now thinks monetary union is beyond saving. A massive rescue will be needed. It will not be forthcoming. German-French relations are the worst since the war, he said. The European insitutions have lost virtually all authority in this crisis. The half-century Project is collapsing. .. or words to that effect, from what I hear.”

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