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The Eurozone is drowning without a common government
Anastasia Bashkatova
*Financial markets are driving the world towards another Great Depression, prominent American financier, George Soros, warned on Friday. He proposed a radical plan to reform Europes financial institutions, one that is even more tough and decisive than the six legislative initiatives for the rescue of Europe, which have been approved by the European Parliament.
The European Commission is considering imposing a tax on financial transactions and financial penalties for distortion of statistical data. Soros, meanwhile, boldly suggests creating a common government for the Eurozone. Domestic experts, however, are confident that these measures will only postpone and not prevent an economic shock in the Eurozone. Russia will also face new economic shocks due to the euro-crisis.
Financial markets are driving the world towards another Great Depression [as the] authorities, particularly in Europe, have lost control of the situation, Soros, warned in his Friday column in the Financial Times. The main cause of the euro crisis, according to the billionaire, is the fact that each country in a seemingly united zone must resolve its financial problems on its own. The idea of a union of countries relying on self-control did not work. The result of integration has suddenly become disintegration. Europe has divided into two layers: debtors the countries that are sinking, and creditors countries that are rising and are able to dictate their terms to the weak. But in practice, for less-developed contrives, these terms are similar to punitive measures, accelerating their collapse.
In the situation which has currently developed in Europe, it is urgently necessary to implement three key measures that will win it some time to create a new growth strategy, without which it is impossible to overcome the debt crisis.
The first measure, according to Soros, entails creating a common treasury for the Eurozone. The second step is to give the European Central Bank (ECB) authority over the national banking sectors in exchange for temporary guarantees and permanent recapitalization on the part of the regulator. As part of the third measure, the ECB must allow countries with low growth rates, such as Italy and Spain, to refinance their debt at a low cost.
Soros noted that his suggested measures do not violate the Lisbon treaty or other fundamental European documents, though he does not deny that these measures are radical.
Indeed, Soross proposals look like a harsher version of the so-called six legislative initiatives which were approved by the European Parliament last week. These initiatives give added authority to the warnings made by the European Commission regarding the fiscal policy of the Eurozone states, increase transparency and improve the quality of European statistics.
In particular, sanctions can be legally recommended in the amount of 0.2% of the GDP for countries providing distorted statistical data on budget deficit and public debt; 0.1% of the GDP for non-compliance with recommendations to correct macroeconomic imbalances. The European Commission is gaining authority to request from the Eurozone states additional necessary information about their situation. A legislative base is also being created for oversight over national reform programs. Moreover, European Commission Chairman Jose Manuel Barroso said on Wednesday that the Commission has approved the proposal to impose a tax on financial transactions in the EU. The tax will be applied during the purchase of stocks, bonds, and derivatives. It will limit speculative transactions and augment the European budget by 55 billion a year, says Barroso. Brussels also plans to issue European stability bonds. The Eurobonds will be stability bonds which are securities that benefit those who play by the rules and harm those who do not, explains Barroso.
Experts, interviewed by Nezavisimaya Gazeta (NG), agreed that the measures, which have been proposed by Soros, are logical. A common economic government is the right step. Today, the situation is very strange: theres a single currency and different countries, but they are sovereign. In the end, in order to make a decision, everyone needs to find a common agreement, said Aleksandr Razuvayev, an independent stock market analyst. He adds that even if these measures are implemented, the Eurozone will not be preserved in its current form: Most likely, the problematic countries will break away. Or maybe things will go back to the way they were before with the German mark, the French franc. The advisor to the chairman of the board of the National Republic Bank, Roman Brezitsky, in turn notes that if Soross proposals are implemented, then their positive effect on economically developed states will only be evident in the initial stage. In the long-term, there may be problems involving major spending, including on supporting the less-developed states, says Brezitsky.
The worst possible scenario for Russia is currently developing, says Razuvayev, as things are slowly falling apart. The painful changes in the Eurozone are stretching over time, the crisis has not been overcome and is becoming more severe, and the European collapse is simply being postponed. In this situation, Russia will face new shocks, because Europe is Russias main foreign trade partner. If demand in Europe falls and the EU, in an attempt to reduce its risks, starts selling off its assets, then it will have an immediate impact on Russias exports and lead to a drop in oil prices. The result: a budget deficit in the RF and a weak rouble.
Brezitsky explains that it is not just that Russia is one of the largest European security holders it is actually increasing its trade with the region. And if problems in the Eurozone worsen in the long-term, then it will have a direct effect on Russia. At a minimum, the country will be earning less, says the expert.
It is hardly likely that the tax on financial transactions in the EU will in any way be beneficial to Russia, say analysts. Due to this tax, part of the clientele will leave the European markets of London, Frankfurt. However, all of this does not mean that the financial flows will immediately be redirected to Russia. Despite our idea to create an international financial center, a minimal number of operators will move to Russia. Today, an enormous flow of funds is directed to Asia. This flow includes Russian investors who will also redirect their operations from London to Shanghai, Singapore and Hong Kong, says Brezitsky.
On the eve of another Great Depression — RT
Anastasia Bashkatova
*Financial markets are driving the world towards another Great Depression, prominent American financier, George Soros, warned on Friday. He proposed a radical plan to reform Europes financial institutions, one that is even more tough and decisive than the six legislative initiatives for the rescue of Europe, which have been approved by the European Parliament.
The European Commission is considering imposing a tax on financial transactions and financial penalties for distortion of statistical data. Soros, meanwhile, boldly suggests creating a common government for the Eurozone. Domestic experts, however, are confident that these measures will only postpone and not prevent an economic shock in the Eurozone. Russia will also face new economic shocks due to the euro-crisis.
Financial markets are driving the world towards another Great Depression [as the] authorities, particularly in Europe, have lost control of the situation, Soros, warned in his Friday column in the Financial Times. The main cause of the euro crisis, according to the billionaire, is the fact that each country in a seemingly united zone must resolve its financial problems on its own. The idea of a union of countries relying on self-control did not work. The result of integration has suddenly become disintegration. Europe has divided into two layers: debtors the countries that are sinking, and creditors countries that are rising and are able to dictate their terms to the weak. But in practice, for less-developed contrives, these terms are similar to punitive measures, accelerating their collapse.
In the situation which has currently developed in Europe, it is urgently necessary to implement three key measures that will win it some time to create a new growth strategy, without which it is impossible to overcome the debt crisis.
The first measure, according to Soros, entails creating a common treasury for the Eurozone. The second step is to give the European Central Bank (ECB) authority over the national banking sectors in exchange for temporary guarantees and permanent recapitalization on the part of the regulator. As part of the third measure, the ECB must allow countries with low growth rates, such as Italy and Spain, to refinance their debt at a low cost.
Soros noted that his suggested measures do not violate the Lisbon treaty or other fundamental European documents, though he does not deny that these measures are radical.
Indeed, Soross proposals look like a harsher version of the so-called six legislative initiatives which were approved by the European Parliament last week. These initiatives give added authority to the warnings made by the European Commission regarding the fiscal policy of the Eurozone states, increase transparency and improve the quality of European statistics.
In particular, sanctions can be legally recommended in the amount of 0.2% of the GDP for countries providing distorted statistical data on budget deficit and public debt; 0.1% of the GDP for non-compliance with recommendations to correct macroeconomic imbalances. The European Commission is gaining authority to request from the Eurozone states additional necessary information about their situation. A legislative base is also being created for oversight over national reform programs. Moreover, European Commission Chairman Jose Manuel Barroso said on Wednesday that the Commission has approved the proposal to impose a tax on financial transactions in the EU. The tax will be applied during the purchase of stocks, bonds, and derivatives. It will limit speculative transactions and augment the European budget by 55 billion a year, says Barroso. Brussels also plans to issue European stability bonds. The Eurobonds will be stability bonds which are securities that benefit those who play by the rules and harm those who do not, explains Barroso.
Experts, interviewed by Nezavisimaya Gazeta (NG), agreed that the measures, which have been proposed by Soros, are logical. A common economic government is the right step. Today, the situation is very strange: theres a single currency and different countries, but they are sovereign. In the end, in order to make a decision, everyone needs to find a common agreement, said Aleksandr Razuvayev, an independent stock market analyst. He adds that even if these measures are implemented, the Eurozone will not be preserved in its current form: Most likely, the problematic countries will break away. Or maybe things will go back to the way they were before with the German mark, the French franc. The advisor to the chairman of the board of the National Republic Bank, Roman Brezitsky, in turn notes that if Soross proposals are implemented, then their positive effect on economically developed states will only be evident in the initial stage. In the long-term, there may be problems involving major spending, including on supporting the less-developed states, says Brezitsky.
The worst possible scenario for Russia is currently developing, says Razuvayev, as things are slowly falling apart. The painful changes in the Eurozone are stretching over time, the crisis has not been overcome and is becoming more severe, and the European collapse is simply being postponed. In this situation, Russia will face new shocks, because Europe is Russias main foreign trade partner. If demand in Europe falls and the EU, in an attempt to reduce its risks, starts selling off its assets, then it will have an immediate impact on Russias exports and lead to a drop in oil prices. The result: a budget deficit in the RF and a weak rouble.
Brezitsky explains that it is not just that Russia is one of the largest European security holders it is actually increasing its trade with the region. And if problems in the Eurozone worsen in the long-term, then it will have a direct effect on Russia. At a minimum, the country will be earning less, says the expert.
It is hardly likely that the tax on financial transactions in the EU will in any way be beneficial to Russia, say analysts. Due to this tax, part of the clientele will leave the European markets of London, Frankfurt. However, all of this does not mean that the financial flows will immediately be redirected to Russia. Despite our idea to create an international financial center, a minimal number of operators will move to Russia. Today, an enormous flow of funds is directed to Asia. This flow includes Russian investors who will also redirect their operations from London to Shanghai, Singapore and Hong Kong, says Brezitsky.
On the eve of another Great Depression — RT
