Societe Generale: Breakup of the Euro Region?
February 15th, 2010I doubt it. The Plan is for fewer currencies, not more. Ordo ab chao.
Via: Business Week:
The Greek budget crisis is a symptom of imbalances that will lead to the breakup of the euro region, according to Societe Generale SA strategist Albert Edwards, and Harvard University Professor Martin Feldstein said monetary union “isn’t working” in its current form.
Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, top-ranked Edwards wrote in a report today. Feldstein, speaking on Bloomberg Radio, said a one-size-fits-all monetary policy has fueled big deficits as countries’ fiscal records differ.
The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” Edwards wrote. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable breakup of the euro zone.”
The euro has slumped 9.9 percent against the dollar since November on concern countries including Greece will struggle to tame their budget deficits. The common currency and stocks in the region dropped yesterday as European leaders closed ranks to defend Greece in a plan that investors said lacked details.
