The eurozone implodes: politicians’ dreams encounter a stark reality check (Dublin Finance)

CPS Research Fellow Keith Boyfield writes for Finance Dublin on the realities being encountered by Eurozone politicians. 

‘You need to change your way of living and change your way of spending,’ is the message sent to the eurozone by Gao Xiqing, who as chief investment officer of the China Investment Corporation could be potentially the biggest investor in proposed eurobonds. As the eurozone crisis rumbles on, outside investors, such as Gao Xiqing, are becoming more and more unconvinced by political efforts to resolve the crisis which in turn is making it harder to get investors outside of the eurozone to invest in euro denominated assets, particularly government debt, writes KEITH BOYFIELD.

Reflecting on the eurozone crisis at the Annual IMF/World Bank Summit in Washington DC in late September one leading and much respected governor of a central bank told me that the predicament could be compared to driving down a long, dark tunnel with poor brakes and no lights; to add to the problem there was a large rock in the middle of the road but the lack of adequate lighting made it difficult to spot; and to round things off, there was no light at the end of the tunnel.

The outcome of both the IMF/World Bank annual meeting and the more recent G20 summit in Cannes has reinforced the sentiments voiced by that central bank governor. The flaws in the euro regime, not least the absence of any agreed procedure for exit from the monetary union, have been explicitly exposed by the markets. As another governor of a leading central bank in the southern hemisphere commented to me in Washington DC, ‘Europe is bankrupt’.

To read the full article at Dublin Finance, click here

Date Added: Friday 2nd December 2011