Open

Coming up

Don't miss

Replay


LATEST SHOWS

AFRICA NEWS

A landslide victory for the 'invisible candidate' in Algeria's Presidential polls

Read more

THE WORLD THIS WEEK

The World This Week - 18 April 2014

Read more

THE WORLD THIS WEEK

The World This Week - 18 April 2014 (part 2)

Read more

MEDIAWATCH

Presidential adviser resigns over "shoe-shine scandal"

Read more

#THE 51%

Breaking stereotypes

Read more

#TECH 24

Galaxy S5 v. HTC One (M8): Which is the right one for you?

Read more

FRANCE IN FOCUS

New PM Manuel Valls outlines priorities

Read more

FASHION

Jean-Marc Loubier, bags and shoes.

Read more

ENCORE!

Hip-hop musician Beat Assailant on mixing the sounds of the city

Read more

  • French journalist tells of release from captivity in Syria

    Read more

  • South Korea ferry captain defends decision to delay evacuation

    Read more

  • Scores killed in South Sudan cattle raid

    Read more

  • PSG clinch fourth League Cup title after beating Lyon

    Read more

  • Le Pen’s National Front fail to woo Britain’s Eurosceptics

    Read more

  • In pictures: French kite festival takes flight

    Read more

  • VIDEO: Anti-Semitic leaflets in Eastern Ukraine condemned

    Read more

  • In pictures: Good Friday celebrated across the globe

    Read more

  • Bouteflika, the ghost president

    Read more

  • Does Valls’ upcoming Vatican trip violate French secularism?

    Read more

  • Ukraine separatists say ‘not bound’ by Geneva deal

    Read more

  • Abel Ferrara’s hotly awaited DSK film to premiere on web

    Read more

  • Obama signs bill to block controversial Iran diplomat from UN post

    Read more

  • Ukraine: ‘One bloody incident could scupper Geneva deal’

    Read more

  • Astronomers discover Earth-like planet that could support life

    Read more

  • Indian election: Votes for sale

    Read more

  • World honours Garcia Marquez’s magical literary legacy

    Read more

  • In pictures: Iranian woman pardons son’s killer at the gallows

    Read more

  • Algeria's ailing Bouteflika clinches fourth term amid fraud claims

    Read more

  • Top Hollande adviser resigns over conflict of interest accusation

    Read more

  • West African Ebola outbreak caused by new strain of virus

    Read more

Europe

'Spain’s situation is very different to Greece’s'

©

Text by Perrine MOUTERDE

Latest update : 2010-05-05

Regulating market speculation is very complicated, says Philippe D'Arvisenet, chief economist at BNP Paribas, who advocates the establishment of a common European budget as an alternative.

Fearing the spread of a Greek-style debt crisis, speculators sent European stock markets tumbling on Tuesday. Stocks in Madrid fell 2.27% and markets in Athens fell almost 4% at the close on Wednesday. The euro itself reached its lowest level since April 2009, at 1.29 dollars. If Europe does not solve its fundamental institutional problems, “the future of the euro may be limited”, Nobel Laureate Joseph Stiglitz said Tuesday.

But the end of the euro is nowhere near, says Philippe D'Arvisenet, chief economist at BNP Paribas. He hopes the Greek crisis will prompt consideration of how to plug the institutional and systemic holes in the euro zone.

There were rumblings Tuesday that the Greek crisis could spread to Spain, causing panic in the markets. Where did this come from?

According to one rumour, Spain has asked the IMF for a loan of 280 billion euros, which corresponds to half of its total debt. But this does not make any sense! The Spanish Prime Minister denies this, the IMF denies it... But the damage is done. Markets always move on fear.

Rumours are always provoked: they aren’t born from nowhere, they’re created for someone to profit from. Who started this rumour? It may be someone in a trading room or the work of hedge funds; we'll never know. The role of rating agencies may also be called into question... There are many stakeholders. What is worrying is that investor expectations manufacture reality. There’s a crisis of confidence in euro markets that feeds off itself.

What impact might this have on the Spanish economy?

Spain’s situation is very different to Greece’s. Its debt is less than half and there has been no such level of falsification of accounts. But it’s certain that in the coming years, many European countries - Spain, but also Portugal and Ireland - will have to have much tighter budgets. It’s the only way to reassure the markets in the short-term. The austerity budget will slow economic activity further in these countries, but also further widen the gap in the euro area.

In a way, Germany, Holland and France are benefiting from this situation. When interest rates rise on Greek bonds - because these securities are not safe, and therefore not attractive - those of other countries fall. For example, Germany’s are less than 3%.

The euro hit its lowest level in a year. Do you believe in the "end of the euro," as evoked by Nobel Prize winning economist Joseph Stiglitz?

First, one shouldn’t necessarily complain about the decline of the euro. A few months ago, it was considered too high. A strong euro is a barrier to exports, and since November it has been noted that export orders are up. So this decline is not entirely negative.

Moreover, the Anglo-Saxons have been predicting the end of the euro for 15 years. The single currency has never pleased them, they dream of an end to the euro.

But in reality, it would be very complicated. We must consider the consequences, both for those who come out and for those who remain in the euro zone.

If you are Greek, and you have some money in the bank, you do not want to devalue your currency by half. In Argentina, the devaluation of the peso resulted in very significant social tension. Moving Greece out of the euro zone would have been a much more violent solution, and full of uncertainties. The Germans also have no interest in this. Like others, they export half their production to the euro zone members. It would be very hard to sell if neighbouring countries had a devalued currency.

What are the possible solutions?

If the situation continues to deteriorate, the euro zone countries will have to do something. Otherwise, we'll go straight to the wall. We must find answers to the flaws in the euro system. We have known since the beginning that there is no federalism; on one side there is the European Central Bank (ECB), and on the other a multitude of governments. We also know that the outcome of a crisis is uncertain.

Faced with this situation, we must implement a common European budget. California, for example, has a disastrous budget situation, but no one is talking about making California leave the United States! Either everyone tightens their belts, or we go towards this form of federalism.

There are plenty of holes in the euro system; it takes a crisis to get everyone to start thinking about them.

On the other hand, regulating market speculation internationally is very complicated. But the debate is open, especially on the role of ratings agencies.
 

Date created : 2010-05-05

  • MARKETS

    Eurozone stocks tumble over renewed Greek debt fears

    Read more

Comments

COMMENT(S)