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Post Irish economic downturn. For example, if a country's citizens saved more instead of consuming imports, this would reduce its trade deficit. Retrieved 6 May The volume-weighted average of all electronic trades transacted in the closing session Real estate refers to land plus anything permanently fixed to it, including buildings, sheds and other items attached to the structure.
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A coupon is the interest rate paid out on a bond on an annual basis. The weighted average coupon of a bond fund is arrived at by weighting the coupon of each bond by its relative size in the portfolio. Weighted average price WAP is computed for most bond funds by weighting the price of each bond by its relative size in the portfolio. This statistic is expressed as a percentage of par face value. The price shown here is "clean," meaning it does not reflect accrued interest.
Monthly volatility refers to annualized standard deviation, a statistical measure that captures the variation of returns from their mean and that is often used to quantify the risk of a fund or index over a specific time period. The higher the volatility, the more the returns fluctuate over time. Absolute return strategies seek to provide positive returns in a wide variety of market conditions.
These strategies employ investment techniques that go beyond conventional long-only investing, including leverage, short selling, futures, options, etc. Arbitrage refers to the simultaneous purchase and sale of an asset in order to profit from a difference in the price of identical or similar financial instruments, on different markets or in different forms.
For example, convertible arbitrage looks for price differences among linked securities, like stocks and convertible bonds of the same company. Merger arbitrage involves investing in securities of companies that are the subject of some form of corporate transaction, including acquisition or merger proposals and leveraged buyouts.
Commodity refers to a basic good used in commerce that is interchangeable with other goods of the same type. Examples include oil, grain and livestock. Correlation is a statistical measure of how two variables relate to each other. Two different investments with a correlation of 1. The higher the correlation, the lower the diversifying effect.
Currency refers to a generally accepted medium of exchange, such as the dollar, the euro, the yen, the Swiss franc, etc. Market neutral is a strategy that involves attempting to remove all directional market risk by being equally long and short.
Futures refers to a financial contract obligating the buyer to purchase an asset or the seller to sell an asset , such as a physical commodity or a financial instrument, at a predetermined future date and price.
Global macro strategies aim to profit from changes in global economies that are typically brought about by shifts in government policy, which impact interest rates and in turn affect currency, bond and stock markets. Hedge funds invest in a diverse range of markets and securities, using a wide variety of techniques and strategies, all intended to reduce risk while focusing on absolute rather than relative returns.
Leverage refers to using borrowed funds to make an investment. Investors use leverage when they believe the return of an investment will exceed the cost of borrowed funds. Leverage can increase the potential for higher returns, but can also increase the risk of loss.
Managed futures involves taking long and short positions in futures and options in the global commodity, interest rate, equity, and currency markets. Precious metals refer to gold, silver, platinum and palladium. Private equity consists of equity securities in operating companies that are not publicly traded on a stock exchange.
Real estate refers to land plus anything permanently fixed to it, including buildings, sheds and other items attached to the structure. Short selling or "shorting" involves selling an asset before it's bought. Typically, an investor borrows shares, immediately sells them, and later buys them back to return to the lender. Volatility is the relative rate at which the price of a security or benchmark moves up and down. Markets at a Glance. Major Stock Indexes 4: Volume updates until 8 p.
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When all banks are forced to raise capital at the same time, the result is going to be even weaker banks and an even longer recession—if not depression. Government intervention should be the first resort, not the last resort. Beyond equity issuance and debt-to-equity conversion, then, one analyst "said that as banks find it more difficult to raise funds, they will move faster to cut down on loans and unload lagging assets" as they work to improve capital ratios.
This latter contraction of balance sheets "could lead to a depression", the analyst said. EU Member States agreed to an additional retroactive lowering of the interest rates of the Greek Loan Facility to a level of just basis points above Euribor. Furthermore, governments of Member States where central banks currently hold Greek government bonds in their investment portfolio commit to pass on to Greece an amount equal to any future income until The European Central Bank ECB has taken a series of measures aimed at reducing volatility in the financial markets and at improving liquidity.
The move took some pressure off Greek government bonds, which had just been downgraded to junk status, making it difficult for the government to raise money on capital markets. The central banks agreed to lower the cost of dollar currency swaps by 50 basis points to come into effect on 5 December They also agreed to provide each other with abundant liquidity to make sure that commercial banks stay liquid in other currencies.
With the aim of boosting the recovery in the eurozone economy by lowering interest rates for businesses, the ECB cut its bank rates in multiple steps in —, reaching an historic low of 0. The lowered borrowing rates have also caused the euro to fall in relation to other currencies, which is hoped will boost exports from the eurozone and further aid the recovery. With inflation falling to 0. On 5 June, the central bank cut the prime interest rate to 0. Stock markets reacted strongly to the ECB rate cuts.
The German DAX index, for example, set a record high the day the new rates were announced. The answer is no. Weber, the former Deutsche Bundesbank president, was once thought to be a likely successor to Jean-Claude Trichet as bank president. He and Stark were both thought to have resigned due to "unhappiness with the ECB's bond purchases , which critics say erode the bank's independence".
Stark was "probably the most hawkish" member of the council when he resigned. On 22 December , the ECB  started the biggest infusion of credit into the European banking system in the euro's year history.
It also hoped that banks would use some of the money to buy government bonds, effectively easing the debt crisis. ECB lending has largely replaced inter-bank lending. On 16 June the European Central Bank together with other European leaders hammered out plans for the ECB to become a bank regulator and to form a deposit insurance program to augment national programs.
Other economic reforms promoting European growth and employment were also proposed. In regards of countries receiving a sovereign bailout Ireland, Portugal and Greece , they will on the other hand not qualify for OMT support before they have regained complete market access, which will normally only happen after having received the last scheduled bailout disbursement.
The European Stability Mechanism ESM is a permanent rescue funding programme to succeed the temporary European Financial Stability Facility and European Financial Stabilisation Mechanism in July  but it had to be postponed until after the Federal Constitutional Court of Germany had confirmed the legality of the measures on 12 September It became effective in Estonia on 4 October after the completion of their ratification process.
On 16 December the European Council agreed a two line amendment to the EU Lisbon Treaty to allow for a permanent bail-out mechanism to be established  including stronger sanctions.
In March , the European Parliament approved the treaty amendment after receiving assurances that the European Commission , rather than EU states, would play 'a central role' in running the ESM.
It is located in Luxembourg. Such a mechanism serves as a "financial firewall". Instead of a default by one country rippling through the entire interconnected financial system, the firewall mechanism can ensure that downstream nations and banking systems are protected by guaranteeing some or all of their obligations.
Then the single default can be managed while limiting financial contagion. Originally EU leaders planned to change existing EU treaties but this was blocked by British prime minister David Cameron , who demanded that the City of London be excluded from future financial regulations, including the proposed EU financial transaction tax.
On 28 June eurozone leaders agreed to permit loans by the European Stability Mechanism to be made directly to stressed banks rather than through eurozone states, to avoid adding to sovereign debt. The reform was linked to plans for banking regulation by the European Central Bank. The reform was immediately reflected by a reduction in yield of long-term bonds issued by member states such as Italy and Spain and a rise in value of the Euro. There has been substantial criticism over the austerity measures implemented by most European nations to counter this debt crisis.
US economist and Nobel laureate Paul Krugman argues that an abrupt return to "'non- Keynesian' financial policies " is not a viable solution. The latter introduced drastic austerity measures but was unable not meet its EU budget deficit targets.
On the other hand, Portugal's leftist coalition fought austerity it increased the minimum wage by 25 percent and took back cuts in the pension system and the public sector and at the same time reduced its budget deficit to below three percent in Gallen no austerity program has ever worked.
Schui particularly notes Winston Churchill 's attempt in and Heinrich Brüning 's attempt in during the Weimar Republic.
Both led to disastrous consequences. According to Keynesian economists "growth-friendly austerity" relies on the false argument that public cuts would be compensated for by more spending from consumers and businesses, a theoretical claim that has not materialised. This led to even lower demand for both products and labour, which further deepened the recession and made it ever more difficult to generate tax revenues and fight public indebtedness.
But its impact is much less than one to one. A one percentage point reduction in the structural deficit delivers a 0. A task that is difficult to achieve without an exogenous eurozone-wide economic boom. Instead of public austerity, a "growth compact" centring on tax increases  and deficit spending is proposed. Furthermore, the two suggest financing additional public investments by growth-friendly taxes on "property, land, wealth, carbon emissions and the under-taxed financial sector".
They also called on EU countries to renegotiate the EU savings tax directive and to sign an agreement to help each other crack down on tax evasion and avoidance. Apart from arguments over whether or not austerity, rather than increased or frozen spending, is a macroeconomic solution,  union leaders have also argued that the working population is being unjustly held responsible for the economic mismanagement errors of economists, investors, and bankers.
Over 23 million EU workers have become unemployed as a consequence of the global economic crisis of —, and this has led many to call for additional regulation of the banking sector across not only Europe, but the entire world. Germany has come under pressure due to not having a government budget deficit and funding it by borrowing more.
As of late , the government federal and state has spent less than it receives in revenue, for the third year in a row, despite low economic growth. Current projections are that by the debt will be less than required by the Stability and Growth Pact.
It has been a long known belief that austerity measures will always reduce the GDP growth in the short term. Some economists believing in Keynesian policies criticised the timing and amount of austerity measures being called for in the bailout programmes, as they argued such extensive measures should not be implemented during the crisis years with an ongoing recession, but if possible delayed until the years after some positive real GDP growth had returned.
In October , a report published by International Monetary Fund IMF also found, that tax hikes and spending cuts during the most recent decade had indeed damaged the GDP growth more severely, compared to what had been expected and forecasted in advance based on the "GDP damage ratios" previously recorded in earlier decades and under different economic scenarios.
In June , EU leaders agreed as a first step to moderately increase the funds of the European Investment Bank , in order to kick-start infrastructure projects and increase loans to the private sector. A few months later 11 out of 17 eurozone countries also agreed to introduce a new EU financial transaction tax to be collected from 1 January In April , Olli Rehn , the European commissioner for economic and monetary affairs in Brussels, "enthusiastically announced to EU parliamentarians in mid-April that 'there was a breakthrough before Easter'.
He said the European heads of state had given the green light to pilot projects worth billions, such as building highways in Greece. To ensure that this is done as professionally as possible, the Germans would like to see the southern European countries receive their own state-owned development banks, modeled after Germany's [Marshall Plan-era-origin] KfW [ Kreditanstalt für Wiederaufbau ] banking group.
It's hoped that this will get the economy moving in Greece and Portugal. In multiple steps during —, the ECB lowered its bank rate to historical lows, reaching 0. Soon after the rates were shaved to 0. The lowered borrowing rates caused the euro to fall in relation to other currencies, which it was hoped would boost exports from the eurozone. Crisis countries must significantly increase their international competitiveness to generate economic growth and improve their terms of trade.
Indian-American journalist Fareed Zakaria notes in November that no debt restructuring will work without growth, even more so as European countries "face pressures from three fronts: In case of economic shocks, policy makers typically try to improve competitiveness by depreciating the currency , as in the case of Iceland, which suffered the largest financial crisis in — in economic history but has since vastly improved its position.
Eurozone countries cannot devalue their currency. As a workaround many policy makers try to restore competitiveness through internal devaluation , a painful economic adjustment process, where a country aims to reduce its unit labour costs. Purchasing power dropped even more to the level of Other economists argue that no matter how much Greece and Portugal drive down their wages, they could never compete with low-cost developing countries such as China or India.
Instead weak European countries must shift their economies to higher quality products and services, though this is a long-term process and may not bring immediate relief. Another option would be to implement fiscal devaluation , based on an idea originally developed by John Maynard Keynes in Germany has successfully pushed its economic competitiveness by increasing the value added tax VAT by three percentage points in , and using part of the additional revenues to lower employer's unemployment insurance contribution.
Portugal has taken a similar stance  and also France appears to follow this suit. According to the report most critical eurozone member countries are in the process of rapid reforms. The authors note that "Many of those countries most in need to adjust [ Greece, Ireland and Spain are among the top five reformers and Portugal is ranked seventh among 17 countries included in the report see graph.
In its Euro Plus Monitor Report , published in November , the Lisbon Council finds that the eurozone has slightly improved its overall health. With the exception of Greece, all eurozone crisis countries are either close to the point where they have achieved the major adjustment or are likely to get there over the course of Portugal and Italy are expected to progress to the turnaround stage in spring , possibly followed by Spain in autumn, while the fate of Greece continues to hang in the balance.
Overall, the authors suggest that if the eurozone gets through the current acute crisis and stays on the reform path "it could eventually emerge from the crisis as the most dynamic of the major Western economies". The Euro Plus Monitor update from spring notes that the eurozone remains on the right track.
According to the authors, almost all vulnerable countries in need of adjustment "are slashing their underlying fiscal deficits and improving their external competitiveness at an impressive speed", for which they expected the eurozone crisis to be over by the end of Regardless of the corrective measures chosen to solve the current predicament, as long as cross border capital flows remain unregulated in the euro area,  current account imbalances are likely to continue.
A country that runs a large current account or trade deficit i. In other words, a country that imports more than it exports must either decrease its savings reserves or borrow to pay for those imports. Conversely, Germany's large trade surplus net export position means that it must either increase its savings reserves or be a net exporter of capital, lending money to other countries to allow them to buy German goods.
Ben Bernanke warned of the risks of such imbalances in , arguing that a "savings glut" in one country with a trade surplus can drive capital into other countries with trade deficits, artificially lowering interest rates and creating asset bubbles. A country with a large trade surplus would generally see the value of its currency appreciate relative to other currencies, which would reduce the imbalance as the relative price of its exports increases. This currency appreciation occurs as the importing country sells its currency to buy the exporting country's currency used to purchase the goods.
Alternatively, trade imbalances can be reduced if a country encouraged domestic saving by restricting or penalising the flow of capital across borders, or by raising interest rates, although this benefit is likely offset by slowing down the economy and increasing government interest payments. Either way, many of the countries involved in the crisis are on the euro, so devaluation, individual interest rates, and capital controls are not available. The only solution left to raise a country's level of saving is to reduce budget deficits and to change consumption and savings habits.
For example, if a country's citizens saved more instead of consuming imports, this would reduce its trade deficit. On the other hand, export driven countries with a large trade surplus, such as Germany, Austria and the Netherlands would need to shift their economies more towards domestic services and increase wages to support domestic consumption. Economic evidence indicates the crisis may have more to do with trade deficits which require private borrowing to fund than public debt levels.
Economist Paul Krugman wrote in March In its spring economic forecast, the European Commission finds "some evidence that the current-account rebalancing is underpinned by changes in relative prices and competitiveness positions as well as gains in export market shares and expenditure switching in deficit countries". According to the Euro Plus Monitor Report , the collective current account of Greece, Ireland, Italy, Portugal, and Spain is improving rapidly and is expected to balance by mid Thereafter these countries as a group would no longer need to import capital.
Several proposals were made in mid to purchase the debt of distressed European countries such as Spain and Italy. Markus Brunnermeier ,  the economist Graham Bishop, and Daniel Gros were among those advancing proposals. Finding a formula, which was not simply backed by Germany, is central in crafting an acceptable and effective remedy. In addition, they're going to have to look at how do they achieve growth at the same time as they're carrying out structural reforms that may take two or three or five years to fully accomplish.
So countries like Spain and Italy, for example, have embarked on some smart structural reforms that everybody thinks are necessary—everything from tax collection to labour markets to a whole host of different issues. But they've got to have the time and the space for those steps to succeed.
And if they are just cutting and cutting and cutting, and their unemployment rate is going up and up and up, and people are pulling back further from spending money because they're feeling a lot of pressure—ironically, that can actually make it harder for them to carry out some of these reforms over the long term The Economist wrote in June Merkel must do to preserve the single currency.
It includes shifting from austerity to a far greater focus on economic growth; complementing the single currency with a banking union with euro-wide deposit insurance, bank oversight and joint means for the recapitalisation or resolution of failing banks ; and embracing a limited form of debt mutualisation to create a joint safe asset and allow peripheral economies the room gradually to reduce their debt burdens.
This is the refrain from Washington, Beijing, London, and indeed most of the capitals of the euro zone. Why hasn't the continent's canniest politician sprung into action? The crisis is pressuring the Euro to move beyond a regulatory state and towards a more federal EU with fiscal powers. Control, including requirements that taxes be raised or budgets cut, would be exercised only when fiscal imbalances developed.
On 6 June , the European Commission adopted a legislative proposal for a harmonised bank recovery and resolution mechanism. The proposed framework sets out the necessary steps and powers to ensure that bank failures across the EU are managed in a way that avoids financial instability. The proposal is part of a new scheme in which banks will be compelled to "bail-in" their creditors whenever they fail, the basic aim being to prevent taxpayer-funded bailouts in the future.
Each institution would also be obliged to set aside at least one per cent of the deposits covered by their national guarantees for a special fund to finance the resolution of banking crisis starting in A growing number of investors and economists say Eurobonds would be the best way of solving a debt crisis,  though their introduction matched by tight financial and budgetary co-ordination may well require changes in EU treaties.
Using the term "stability bonds", Jose Manuel Barroso insisted that any such plan would have to be matched by tight fiscal surveillance and economic policy coordination as an essential counterpart so as to avoid moral hazard and ensure sustainable public finances. Germany remains largely opposed at least in the short term to a collective takeover of the debt of states that have run excessive budget deficits and borrowed excessively over the past years.
ESBies could be issued by public or private-sector entities and would "weaken the diabolic loop and its diffusion across countries". It requires "no significant change in treaties or legislation. In the idea was picked up by the European Central Bank. The European Commission has also shown interest and plans to include ESBies in a future white paper dealing with the aftermath of the financial crisis.
On 20 October , the Austrian Institute of Economic Research published an article that suggests transforming the EFSF into a European Monetary Fund EMF , which could provide governments with fixed interest rate Eurobonds at a rate slightly below medium-term economic growth in nominal terms. These bonds would not be tradable but could be held by investors with the EMF and liquidated at any time. To ensure fiscal discipline despite lack of market pressure, the EMF would operate according to strict rules, providing funds only to countries that meet fiscal and macroeconomic criteria.
Governments lacking sound financial policies would be forced to rely on traditional national governmental bonds with less favourable market rates. The econometric analysis suggests that "If the short-term and long- term interest rates in the euro area were stabilised at 1. At the same time, sovereign debt levels would be significantly lower with, e. Furthermore, banks would no longer be able to benefit unduly from intermediary profits by borrowing from the ECB at low rates and investing in government bonds at high rates.
The Boston Consulting Group BCG adds that if the overall debt load continues to grow faster than the economy, then large-scale debt restructuring becomes inevitable. The authors admit that such programmes would be "drastic", "unpopular" and "require broad political coordination and leadership" but they maintain that the longer politicians and central bankers wait, the more necessary such a step will be.
Thomas Piketty , French economist and author of the bestselling book Capital in the Twenty-First Century regards taxes on capital as a more favorable option than austerity inefficient and unjust and inflation only affects cash but neither real estates nor business capital. According to his analysis, a flat tax of 15 percent on private wealth would provide the state with nearly a year's worth national income, which would allow for immediate reimbursement of the entire public debt.
Instead of a one-time write-off, German economist Harald Spehl has called for a year debt-reduction plan, similar to the one Germany used after World War II to share the burden of reconstruction and development. According to this agreement, West Germany had to make repayments only when it was running a trade surplus, that is "when it had earned the money to pay up, rather than having to borrow more, or dip into its foreign currency reserves.
The European bailouts are largely about shifting exposure from banks and others, who otherwise are lined up for losses on the sovereign debt they have piled up, onto European taxpayers. First, the "no bail-out" clause Article TFEU ensures that the responsibility for repaying public debt remains national and prevents risk premiums caused by unsound fiscal policies from spilling over to partner countries.
The clause thus encourages prudent fiscal policies at the national level. The European Central Bank 's purchase of distressed country bonds can be viewed as violating the prohibition of monetary financing of budget deficits Article TFEU.
Articles and were meant to create disincentives for EU member states to run excessive deficits and state debt, and prevent the moral hazard of over-spending and lending in good times.
They were also meant to protect the taxpayers of the other more prudent member states. By issuing bail-out aid guaranteed by prudent eurozone taxpayers to rule-breaking eurozone countries such as Greece, the EU and eurozone countries also encourage moral hazard in the future. The EU treaties contain so called convergence criteria , specified in the protocols of the Treaties of the European Union.
For eurozone members there is the Stability and Growth Pact , which contains the same requirements for budget deficit and debt limitation but with a much stricter regime. In the past, many European countries have substantially exceeded these criteria over a long period of time.
According to a study by economists at St Gallen University credit rating agencies have fuelled rising euro zone indebtedness by issuing more severe downgrades since the sovereign debt crisis unfolded in The authors concluded that rating agencies were not consistent in their judgments, on average rating Portugal, Ireland, and Greece 2.
Germany, Finland and Luxembourg. European policy makers have criticised ratings agencies for acting politically, accusing the Big Three of bias towards European assets and fuelling speculation.
France too has shown its anger at its downgrade. Similar comments were made by high-ranking politicians in Germany. Michael Fuchs , deputy leader of the leading Christian Democrats , said: Why doesn't it act on the highly indebted United States or highly indebted Britain?
Credit rating agencies were also accused of bullying politicians by systematically downgrading eurozone countries just before important European Council meetings. As one EU source put it: It is strange that we have so many downgrades in the weeks of summits.
In essence, this forced European banks and more importantly the European Central Bank , e. Due to the failures of the ratings agencies, European regulators obtained new powers to supervise ratings agencies. Germany's foreign minister Guido Westerwelle called for an "independent" European ratings agency, which could avoid the conflicts of interest that he claimed US-based agencies faced.
On 30 January , the company said it was already collecting funds from financial institutions and business intelligence agencies to set up an independent non-profit ratings agency by mid, which could provide its first country ratings by the end of the year.
But attempts to regulate credit rating agencies more strictly in the wake of the eurozone crisis have been rather unsuccessful. Some in the Greek, Spanish, and French press and elsewhere spread conspiracy theories that claimed that the U. The Economist rebutted these "Anglo-Saxon conspiracy" claims, writing that although American and British traders overestimated the weakness of southern European public finances and the probability of the breakup of the eurozone breakup, these sentiments were an ordinary market panic, rather than some deliberate plot.
Greek Prime Minister Papandreou is quoted as saying that there was no question of Greece leaving the euro and suggested that the crisis was politically as well as financially motivated. Both the Spanish and Greek Prime Ministers have accused financial speculators and hedge funds of worsening the crisis by short selling euros. Goldman Sachs and other banks faced an inquiry by the Federal Reserve over their derivatives arrangements with Greece. The Guardian reported that "Goldman was reportedly the most heavily involved of a dozen or so Wall Street banks" that assisted the Greek government in the early s "to structure complex derivatives deals early in the decade and 'borrow' billions of dollars in exchange rate swaps, which did not officially count as debt under eurozone rules.
In response to accusations that speculators were worsening the problem, some markets banned naked short selling for a few months. Some economists, mostly from outside Europe and associated with Modern Monetary Theory and other post-Keynesian schools, condemned the design of the euro currency system from the beginning because it ceded national monetary and economic sovereignty but lacked a central fiscal authority.
When faced with economic problems, they maintained, "Without such an institution, EMU would prevent effective action by individual countries and put nothing in its place. Ricci of the IMF, contend that the eurozone does not fulfil the necessary criteria for an optimum currency area , though it is moving in that direction. As the debt crisis expanded beyond Greece, these economists continued to advocate, albeit more forcefully, the disbandment of the eurozone. If this was not immediately feasible, they recommended that Greece and the other debtor nations unilaterally leave the eurozone, default on their debts, regain their fiscal sovereignty, and re-adopt national currencies.
The likely substantial fall in the euro against a newly reconstituted Deutsche Mark would give a "huge boost" to its members' competitiveness. Iceland, not part of the EU, is regarded as one of Europe's recovery success stories.
Labour concessions, a minimal reliance on public debt, and tax reform helped to further a pro-growth policy. The Wall Street Journal added that without the German-led bloc, a residual euro would have the flexibility to keep interest rates low  and engage in quantitative easing or fiscal stimulus in support of a job-targeting economic policy  instead of inflation targeting in the current configuration.
There is opposition in this view. The national exits are expected to be an expensive proposition. The breakdown of the currency would lead to insolvency of several euro zone countries, a breakdown in intrazone payments.
Having instability and the public debt issue still not solved, the contagion effects and instability would spread into the system.
According to Steven Erlanger from The New York Times, a "Greek departure is likely to be seen as the beginning of the end for the whole euro zone project, a major accomplishment, whatever its faults, in the post-War construction of a Europe "whole and at peace". The challenges to the speculation about the break-up or salvage of the eurozone is rooted in its innate nature that the break-up or salvage of eurozone is not only an economic decision but also a critical political decision followed by complicated ramifications that "If Berlin pays the bills and tells the rest of Europe how to behave, it risks fostering destructive nationalist resentment against Germany and The Economist provides a somewhat modified approach to saving the euro in that "a limited version of federalisation could be less miserable solution than break-up of the euro".
In order for overindebted countries to stabilise the dwindling euro and economy, the overindebted countries require "access to money and for banks to have a "safe" euro-wide class of assets that is not tied to the fortunes of one country" which could be obtained by "narrower Eurobond that mutualises a limited amount of debt for a limited amount of time".
Instead of the break-up and issuing new national governments bonds by individual euro-zone governments, "everybody, from Germany debt: Each country would pledge a specified tax such as a VAT surcharge to provide the cash. He argues that to save the Euro long-term structural changes are essential in addition to the immediate steps needed to arrest the crisis. The changes he recommends include even greater economic integration of the European Union. Following the formation of the Treasury, the European Council could then authorise the ECB to "step into the breach", with risks to the ECB's solvency being indemnified.
In particular, he cautions, Germans will be wary of any such move, not least because many continue to believe that they have a choice between saving the Euro and abandoning it. Soros writes that a collapse of the European Union would precipitate an uncontrollable financial meltdown and thus "the only way" to avert "another Great Depression" is the formation of a European Treasury. In , members of the European Union signed an agreement known as the Maastricht Treaty , under which they pledged to limit their deficit spending and debt levels.
Some EU member states, including Greece and Italy, were able to circumvent these rules and mask their deficit and debt levels through the use of complex currency and credit derivatives structures.
This added a new dimension in the world financial turmoil, as the issues of " creative accounting " and manipulation of statistics by several nations came into focus, potentially undermining investor confidence.
The focus has naturally remained on Greece due to its debt crisis. There have been reports about manipulated statistics by EU and other nations aiming, as was the case for Greece, to mask the sizes of public debts and deficits. These have included analyses of examples in several countries      the United Kingdom,      Spain,  the United States,    and even Germany.
After extensive negotiations to implement a collateral structure open to all eurozone countries, on 4 October , a modified escrow collateral agreement was reached. The expectation is that only Finland will utilise it, due, in part, to a requirement to contribute initial capital to European Stability Mechanism in one instalment instead of five instalments over time.
Finland, as one of the strongest AAA countries, can raise the required capital with relative ease. At the beginning of October, Slovakia and Netherlands were the last countries to vote on the EFSF expansion , which was the immediate issue behind the collateral discussion, with a mid-October vote. Finland's recommendation to the crisis countries is to issue asset-backed securities to cover the immediate need, a tactic successfully used in Finland's early s recession ,  in addition to spending cuts and bad banking.
The handling of the crisis has led to the premature end of several European national governments and influenced the outcome of many elections:. This section is very long. You can click here to skip it.
From Wikipedia, the free encyclopedia. Redirected from European sovereign-debt crisis. Causes of the European debt crisis. Public debt in , Source: European Commission  Legend: Post Irish economic downturn. Policy reactions to the eurozone crisis.
European Financial Stability Facility. European Financial Stabilisation Mechanism. Economic reforms and recovery proposals regarding the Eurozone crisis. Proposed long-term solutions for the European sovereign-debt crisis. Controversies surrounding the Eurozone crisis. Consolidated version of the Treaty on the Functioning of the European Union. Greek withdrawal from the eurozone. Retrieved 22 July