Excessive Leverage: The Root of All Financial Crises
Today’s European sovereign-debt crisis has much in common with other seemingly unrelated crises of the past decade. The common element? Too much leverage. Let’s take a look at the last three major...
View ArticlePrivate Sector Involvement Is Unlikely in Second Portuguese Bailout
With 10-year Portuguese bond yields above 14% (see Display), the market is suggesting that Portugal will soon need another bailout from its euro-area partners. While we share the market’s skepticism...
View ArticleLatest Deal Postpones Greece’s Day of Reckoning
The second rescue package for Greece that was agreed upon yesterday by euro-area finance ministers should reduce the probability of a near-term Greek bankruptcy and possible euro exit. But substantial...
View ArticleWhat Will Happen if Greece Leaves the Euro Area?
With party leaders failing to set aside their differences, Greece is set to hold another general election on June 17. The outcome is hard to predict, but one thing is clear: a Greek exit from the euro...
View ArticleGreek Election Will Be a Watershed in the Euro Crisis
As Greek voters prepare to go to the polls on Sunday, we are approaching a pivotal stage in the sovereign-debt crisis—and, perhaps, in the post-war history of European economic and political...
View ArticleGreece Gains Some Breathing Space
Today, New Democracy (ND) leader Antonis Samaras will try to form a government. If he succeeds, an immediate disaster scenario will have been avoided. The question is: for how long? Yesterday, the...
View ArticleEuro Area Still in Denial about Failure in Greece
Despite the Greek government’s best efforts, last night’s meeting of euro-area finance ministers failed to approve the release of new funding. We think it’s only a matter of time before Greece gets its...
View ArticleGreece Still Needs a Long-Term Growth Plan
Even by the standards of the sovereign-debt crisis, the provisional agreement reached yesterday by euro-area finance ministers and the International Monetary Fund (IMF) on a second Greek rescue package...
View ArticleEuro-Area Periphery Faces More Pain to Complete Rebalancing
Most peripheral euro-area countries have significantly improved their competitiveness recently, but more needs to be done. With currency devaluation ruled out, further downward pressure on labor costs...
View ArticleIs the Euro “Dangerously High”?
Jean-Claude Juncker’s view that the euro is “dangerously high” isn’t shared by the European Central Bank (ECB). As long as this is the case, the single currency may continue to defy fundamentals and...
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