Breakup of the Euro isn’t unthinkable – Peer Steinbrueck

Peer Steinbrueck, who served as finance minister under Angela Merkel from 2005 to 2009, has published, Unterm Strich (“On Balance”), his insider view of the financial crisis. It looks to be a fascinating read.  Bloomberg has a great first look:

A breakup of the European currency zone isn’t unthinkable, though it would be a catastrophe, he says. The Greek crisis exposed what he describes as “the birth deformities of European currency union” — the absence of common economic policies. The idea of creating them now is an “illusion,” he writes…

In a rare political-insider cameo, Steinbrueck recalls meeting George Papandreou in January 2009 in Berlin, when the current prime minister of Greece was still in opposition. After soliciting deficit-reduction advice, Papandreou remarked, tellingly, that “he was no longer sure he really wanted to win the election.”…

Steinbrueck describes Tuesday, Sept. 16, 2008, the day after Lehman filed for bankruptcy protection, as “one of the most dramatic days of my political life.” After speaking in parliament with “the world teetering on the edge of an abyss,” he met a former U.S. treasury secretary for a long-arranged appointment.

“Even Robert Rubin couldn’t explain the Lehman case to me…”

The major risk to the Euro’s viability is reform fatigue and the European street’s unwillingness to continue with the necessary budget austerity to realize EU fiscal convergence.   The political risks are high as slashing budgets have few supporters x/sovereign creditors.   A Euro fracture in the next few years is currently a low probability,  but not impossible.

During his European tour, China Premier Wen Jiabao told Greek lawmakers that his country applauded Greece’s handling of its debts crisis and said the country is interested in buying Greek government bonds.   China is using the leverage of its $2.4 trillion war chest of international reserves to win friends and influence in the international financial community.   Stay tuned.

Related Articles
China’s Wen offers to buy Greek debt – Reuters
Germany’s Steinbrueck Says Greece Was Just ‘a Foretaste’: Books – Bloomberg
Tougher austerity measures for Greece – BBC
Greece announces new austerity measures – BBC
Europe on strike over austerity measures – Telegraph
Europe-wide day of action fizzles – Montreal Gazette
Flames of anger: Strike fury over spending cuts sweeps Europe – Daily Mail
EMU Break-up:  Quantifying the Unthinkable – ING

This entry was posted in Black Swan Watch, Bonds, China, Credit, Geopolitical, Monetary Policy, Policy, Sovereign Risk and tagged , , , , . Bookmark the permalink.

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