provost
February 25, 2010, 10:26am
#1
reuters.com/article/idUSTRE61N4HU20100224
Germany quietly gains from euro zone crisis Germany is quietly doing well out of the biggest test yet for the euro zone .
Germany
The crisis, triggered by market concerns about Greece’s ability to fund its fiscal largesse, gives Berlin more leverage to press for public finance discipline across the euro zone.
Greece’s problems with a budget deficit that was four times the European Union limit in 2009, have also bolstered demand for German bonds and thereby lowered Berlin’s borrowing costs, while weighing on the euro to the profit of German exporters .
Such benefits, easily lost sight of amid German complaints at Greek behavior, may stiffen some Germans’ reluctance to help Greece, though if Athens’ debt woes start to threaten the euro zone’s future Berlin will likely act to save the currency club.
(later)
The euro has fallen that much since the end of last year , weighed down by market angst over Greece’s debt mountain and the potential threat it poses to the single European currency.
A weaker euro makes German goods more competitive in markets beyond the euro zone and recent surveys have shown improved prospects for the country’s exporters, whose fortunes are crucial to the health of the German economy – Europe’s largest.
A survey of German purchasing managers released last Friday showed an index on new export orders in the manufacturing sector rose in February to its highest level in three years.
(later)
The crisis may also help Bundesbank chief Axel Weber’s chances of succeeding Jean-Claude Trichet as president of the European Central Bank in 2011.
Allies of German Chancellor Angela Merkel have thrown their weight behind Weber, an inflation hawk, who they feel is the right man to steer the euro zone through uncertain times and in whose hands the single currency would be safe.
There are no declared candidates to succeed Trichet but the two leading contenders are widely seen as Weber, 52, and Italy’s Mario Draghi, 62, a member of the ECB’s Governing Council and chairman of the influential Financial Stability Board.
(later)
The euro zone crisis is proving a clear help to Germany on debt markets, where risk aversion among investors has meant lower yields – and lower issuance costs – on German papers while yields have risen on peripheral euro zone instruments .
This demand for German paper meant Germany was able to set a 1-percent coupon on new 2-year Schatz notes it sold last week, below the 1.25-percent coupon set on the prior issue. The yield on Schatz bonds plumbed a new euro lifetime low on Tuesday.
(later)
Doh, why has it taken so bloody long to see this? The ECB isn’t going to use future inflation as a threat to weaken the euro. Instead, it has a far more potent force to prevent over-valuation - structural weakness. When we were talking about the decline of the dollar as the reserve currency, we wondered if the euro was going to become the new reserve and if that was a good thing for the eurozone . The pros were constant liquidity, the cons, though, were an over-valued currency with the implications this would have for balance of trade. The US has allowed itself to be hollowed out by a strong dollar relative to China. Europe must consider whether it is wise to do the same thing.
Bureaucrats consider and discuss.
The market decides.
The empire is dead before it even got started (thankfully).
yoganmahew:
Doh, why has it taken so bloody long to see this? The ECB isn’t going to use future inflation as a threat to weaken the euro. Instead, it has a far more potent force to prevent over-valuation - structural weakness. When we were talking about the decline of the dollar as the reserve currency, we wondered if the euro was going to become the new reserve and if that was a good thing for the eurozone . The pros were constant liquidity, the cons, though, were an over-valued currency with the implications this would have for balance of trade. The US has allowed itself to be hollowed out by a strong dollar relative to China. Europe must consider whether it is wise to do the same thing.
There may not be much choice in the matter
