The Economist And EU Bonds

Well, I think it is now obvious that (following the articles from Munchau and Soros, and a string of leaders on the general topic of how the Eurozone need to strengthen its architecture) that the Financial Times has thrown its full weight behind the campaign for a new initiative on the European Bonds front, but what about that other stalwart of the UK Economic and Financial media? It seems to me they have yet to position themselves (unless anyone can point me in the way of something to the contary).

In this weeks Europe section, The Economist does find the time for a lengthy piece on Michael Glos’s resignation, although they do seem to miss the possibility that his leaving may have something to do with an off-stage rumpus about what Germany may and may not sign up to, preferring rather to draw our attention to his succesor’s blue blood and the fact that he has ten names. Or there is an article on euthanasia in Italy ( The Economist, understandably, never misses the opportunity to take a dig at Italy’s political class, who get so embroiled in the Eluana Englaro issue at a time when Italy’s economy is, once more, sinking fast). Or there is an article which explains how once the Balkans sneezes it then goes on to get pneumonia, but the rest of the EU no longer catches a cold.

But of the fact that there is a second round of bank bailouts coming, that German ministers are talking about bailing out whole states, that there is a lively and perfectly healthy debate taking place about whether or not the issue of Community backed bonds might help to stabilise yield spreads, of all this I can’t find any mention. Helloo, is anybody there?

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

6 thoughts on “The Economist And EU Bonds

  1. If EU bonds were issued, who would determine the economic policy of the countries issuing them? How would that policy be enforced? A refusal to guarantee new bonds, making sure the old ones would default?

  2. From Vox:

    http://www.voxeu.org/index.php?q=node/2506

    “The euro is plunging against the dollar because investors, in their scramble for safety and liquidity, are flocking to US and, also to some extent, Japanese government bonds which are considered safer and more liquid than other government-backed paper available in the market – including public debt instruments issued by European governments. In other words, the constellation of separate markets for sovereign debt paper of unequal quality issued by European governments cannot compete with the US market for the huge global financial flows in search of a safe harbour. Until the EU develops a unified market for bonds denominated in euro and backed jointly by EU member states – or, better, by euro-area member states – its claim for the status of reserve currency for the euro will not be met. As a result, capital is not coming to Europe, where it is badly needed to shore up its shaken financial system; moreover, the US will continue to dictate the agenda in international monetary affairs, even now, after the colossal damage inflicted on the world by their misguided macro and regulatory policies. To add insult to injury the US government is now paying 2-3 percentage points less on its short term debt than even the most virtuous EU member states.”

    I’m not so sure that this would be good for my country, but it did make some sense then, and makes even more sense now. I believe that bond buyers are now actually buying on a guarantee of some kind happening, which leads me to believe that the idea is gaining strength.

  3. Presumably the editor follows the crisis by nodding along to the Republican debate in Congress.
    Micklethwait’s climb up the greasy pole was a sustained exercise in deference to his sources inside the GOP – at the cost of making the American section an infuriating joke.
    Expect Greenspan’s endorsement of nationalisation to feature on Friday.

    And in fairness I’d expect EU bonds to make an appearance too, following rather than leading the debate. As you point out, it’s got too big to ignore.

  4. This is Economist we’re talking about, constantly torn between its mates in Conservative party (with their irrational hatred of the EU), and its mates in the business world (who understand the importance of the EU in securing free trade).

    “They have sat on the fence for so long that the iron has entered their soul.”

  5. I think the idea of EU bonds is silly under the current circumstances. If some of your boats are leaking, you don’t tie them all together and hope for the best. You repair the ones that are leaking. To do otherwise is to risk all your boats sinking.

  6. Can you imagine the internal squabbles that would come about within the Eu when inflation starts to take hold; and you are holding Eu bonds? A couple of big players will likely bail on the bonds causing interest rates to climb… German et al economic activity will stall… voices will be raised… umbrella drinks will be served in Spain, Greece, Italy… life will be normal?

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