- Bruxelles évoque le risque d'une récession dans la zone euro en 2012


BRUXELLES (AP) — La zone euro pourrait entrer l'an prochain dans une "récession profonde et prolongée", a averti jeudi la Commission européenne, alors que l'Italie profitait de son côté d'une légère accalmie sur les marchés, le taux de ses obligations à dix ans s'inscrivant en baisse.
La croissance devrait s'établir à seulement 0,5% du produit intérieur brut (PIB) dans la zone euro en 2012 (0,6% dans l'UE), selon la Commission, qui tablait encore au printemps sur une progression de 1,8% pour l'an prochain. "Cette prévision est en fait un dernier appel au sursaut", a déclaré Olli Rehn, commissaire européen aux affaires monétaires. "La croissance s'est arrêtée en Europe et nous pourrions connaître une nouvelle phase de récession."
La Commission s'attend au retour à une "croissance lente" d'environ 1,5% d'ici à 2013. Pour la France, elle envisage une croissance de 0,6% pour 2012 et 1,4% en 2013.
L'exécutif européen reconnaît pour la première fois l'éventualité d'une récession forte dans la zone euro, un scénario noir qui pourrait durement frapper l'économie mondiale. Une "récession profonde et prolongée associée à la poursuite des turbulences sur les marchés ne peut être exclue", souligne-t-elle.
La révision des perspectives de croissance dans la zone euro intervient alors que la crise de la dette menace désormais de s'étendre à l'Italie, troisième économie du groupe de 17 pays partageant la monnaie unique.
Le taux des obligations italiennes à dix ans a baissé jeudi revenant à des niveaux considérés comme soutenables. Ils avaient dépassé allègrement les 7% la veille, suscitant l'inquiétude des marchés qui craignent de voir Rome suivre le chemin de la Grèce, de l'Irlande et du Portugal, contraints de demander une aide extérieure.
Les spéculations sur le remplacement du président du Conseil Silvio Berlusconi par l'économiste et ancien commissaire européen à la concurrence Mario Monti ont contribué à calmer les investisseurs jeudi, mais les taux italiens restent plus élevés qu'il y a encore une semaine. Le président Giorgio Napolitano a assuré mercredi que Silvio Berlusconi céderait le pouvoir après l'adoption au Parlement, peut-être dès samedi, de réformes économiques exigées par l'Union européenne.
En Grèce, l'ancien vice-président de la Banque centrale européenne Lucas Papadémos a été nommé jeudi Premier ministre en remplacement du socialiste Georges Papandréou à l'issue de quatre jours de tractations sur la formation d'un gouvernement de coalition par intérim.
M. Papadémos a aussitôt lancé un appel à l'unité et promis de rechercher la coopération des différents partis afin de préserver son pays de la faillite et d'assurer son maintien dans la zone euro. "L'économie grecque est toujours confrontée à d'énormes problèmes malgré les grands efforts qui ont été déployés en faveur de la réforme fiscale", a-t-il dit. Mais "la participation de notre pays à la zone euro est une garantie pour la stabilité monétaire du pays."
Au Portugal, le Parlement a commencé jeudi à débattre d'un nouveau plan d'austérité. Le gouvernement de centre-droit du Premier ministre Pedro Passos Coelho avance que les mesures d'austérité incluses dans son projet de loi de finances pour 2012 sont inévitables.
Le Parti socialiste, principale formation de l'opposition, a approuvé les termes du plan, et le gouvernement dispose d'un soutien suffisant pour obtenir l'adoption de ses propositions au Parlement le 30 novembre.
M. Passos Coelho a affirmé jeudi qu'il ne reculerait pas sur les nouvelles mesures d'austérité, qui mêlent hausses d'impôts et baisses des salaires et des dépenses. "Personne ne sera épargné dans la promulgation de ce programme budgétaire", a-t-il déclaré aux députés. Le Premier ministre portugais a précisé vouloir réduire les dépenses publiques à 43% du PIB annuel en 2014, contre 50,6% actuellement.
Par ailleurs, le commissaire européen aux affaires monétaires Olli Rehn a prévenu que si cinq Etats -Belgique, Chypre, Hongrie, Malte et Pologne- ne mettaient pas rapidement en oeuvre des mesures supplémentaires de contrôle budgétaire, il emploierait les nouveaux pouvoirs de sanction qui devraient entrer en vigueur d'ici à la mi-décembre. "En ce qui me concerne, je commencerai à utiliser dès le premier jour les nouvelles règles relatives à la gouvernance économique", a-t-il averti.
Les sanctions prévues pour les pays dépassant les limites fixées de déficit budgétaire et d'endettement seront davantage automatiques afin de prévenir une aggravation de la crise de la dette. AP



- Forget Berlusconi. Bring back the lira

PETER MORICI

Ousting Silvio Berlusconi won’t make Italy’s fiscal mess any easier – with or without him, its debt is impossible, and Italy is headed for default.
Italy’s problems are fundamentally different than those of some other troubled countries, such as Greece. Like others, its social benefits are too generous, but substantially curbing those won’t bring its books into balance. It’s simply too late.

Italy’s budget deficit is 3.6 of GDP, less than half of the U.S. gap, but its total debt, amassed over many years, is 130 per cent. That’s an amount well above what economists consider manageable even for a country, such as the United States, that can print money, and it’s even worse for one, such as Italy, without its own currency.
Although the final act of the Berlusconi government was to craft austerity measures that will lower the deficit to less than 2 per cent of GDP, about €25-billion, it must borrow €300-billion – a massive 19 per cent of GDP – in private capital markets in 2012 to repay maturing debt. Italy is simply not growing fast enough in a Europe crippled by crises in Ireland, Greece, Spain and Portugal for private investors to take that bet.
If Italy’s nominal GDP were growing at a modest 4 per cent and the interest rates it paid on new debt were 5 per cent or less, it might manage its way out. But neither is likely. In recent days, investors have demanded record rates, well above 7 per cent, to purchase existing Italian debt.
Even at those rates, private demand is thin, and the European Central Bank has had to buy substantial amounts of Italian bonds.
Next year, the euro zone is likely not to grow in real terms, and Italian nominal growth (real growth plus inflation) is unlikely to much exceed 3 per cent and more likely to be nearer to zero. With such low nominal growth, interest rates on Italian debt much below 5 per cent would be needed to keep Rome afloat. Even at those rates, the ECB would have to take a lion’s share of Italy’s new debt issues.
The Germans won’t like such purchases, and those are not likely to happen. Even if Berlin went along, the ECB then would be compelled to monetarize significantly more of other European sovereign debt, and the inflation that followed would unravel the myth of stability and unity that justifies the euro.
Italy is too large for Germany, France and the smaller prosperous countries to rescue. Large purchases of Italian debt by France would surely result in the loss of an AAA rating it already doesn’t deserve, push up further French borrowing costs and put French finances into a negative feedback cycle. With Europe imploding, even Germany’s finances would not look quite so pristine.
The only sane option Italy really has is to earnestly implement austerity, drop the euro, remake public and private debt in the re-established lira, and let a falling value for the lira in currency markets impose a haircut on private creditors. Under that scenario, the losses investors took from devaluation would be much less than the losses they would endure in the chaos that Italy’s finances could unleash.
Peter Morici is a professor at the University of Maryland’s Robert H. Smith School of Business and a former chief economist at the U.S. International Trade Commission.



- Italie : Mario Monti, à peine nommé, déjà fragile

L'ex-commissaire européen a été désigné dimanche soir pour former le nouveau gouvernement, mais les partis politiques sont en embuscade.
Mario Monti, ex-commissaire européen, a été nommé dimanche soir président du Conseil par le président de la République italienne.

Mario Monti a été désigné dimanche soir par le président Giorgio Napolitano pour tenter de former un nouveau gouvernement. Cette désignation est arrivée au terme d'une journée de consultations durant laquelle, conformément à la Constitution, Napolitano a reçu les anciens présidents de la République, les présidents des deux chambres et les responsables de tous les partis représentés au Parlement.
Toutes les formations, à l'exclusion de la Ligue du Nord, qui a annoncé son opposition au gouvernement Monti, et de l'Italie des valeurs (IDV) d'Antonio Di Pietro, qui a exprimé ses "réserves", ont convergé sur l'ancien commissaire européen pour succéder à Silvio Berlusconi. Mais des divergences demeurent sur la composition et la durée de ce gouvernement.
Mario Monti aurait souhaité former un exécutif majoritairement composé de techniciens, mais avec la présence d'un responsable de chacun des deux plus grands partis italiens, Peuple de la liberté (PDL) et Parti démocrate (PD). Une prise de responsabilités nécessaire pour assurer la stabilité à un gouvernement destiné à durer jusqu'à la fin de la législature, au printemps 2013.
Du bout des lèvres
Assurant un appui inconditionnel à Monti et sans poser de limite à la durée de l'exécutif, le PD a toutefois refusé d'entrer dans le cabinet de l'ancien commissaire européen. Donné gagnant par tous les sondages si des élections avaient lieu immédiatement, le PD renonce à demander le retour aux urnes pour arriver au pouvoir, mais exige que la responsabilité de la cure de cheval qui attend le pays retombe sur les techniciens.
Dans une rencontre samedi avec Mario Monti, Berlusconi avait en revanche accepté que le PDL participe au gouvernement. Mais au-delà d'une présence symbolique, il revendiquait le ministère de la Justice et celui du Développement économique. Autant de garanties pour ses procès en cours et pour l'avenir de ses entreprises. Ces requêtes ont été jugées irrecevables par Mario Monti. Le PDL s'est donc résigné à ne pas participer au gouvernement et à soutenir, du bout des lèvres, la naissance d'un exécutif Monti. Il limite toutefois la durée du cabinet à l'adoption des mesures de rigueur exigées par Bruxelles. Quelques mois tout au plus avant de retourner aux urnes.
Sans gouvernement
Mario Monti engagera à son tour des consultations pour fignoler son équipe et se présenter au Sénat mardi et à la Chambre basse mercredi. S'il n'obtenait pas la confiance, il resterait en fonction pour régler les affaires courantes et conduire le pays aux urnes d'ici à deux mois.
L'Italie se présente donc lundi à l'ouverture des marchés sans gouvernement, mais avec un président du Conseil. Avec quelles probabilités de mener à bien les réformes ? L'absence des deux grands partis dans l'exécutif fait redouter coups fourrés et chausse-trapes quand il faudra adopter l'avancement de l'âge de la retraite, la libéralisation du marché du travail ou l'imposition d'un impôt sur le patrimoine.
Fragilisé par cette naissance aux forceps, l'exécutif Monti devra également se méfier d'un "come-back" de Silvio Berlusconi. Hier, le Cavaliere a annoncé qu'il voulait "reprendre le chemin du gouvernement". Une velléité qui rappelle le final du Caïman, le film dans lequel le personnage censé représenté le Cavaliere brûlait l'Assemblée nationale plutôt que d'abandonner le pouvoir.


- Worst-Case Scenarios - Berlin Prepares for Possible Greek Exit from Euro Zone

The Tomb of the Unknown Soldier in Athens: The German government has been running simulations to prepare for a possible Greek exit from the euro zone.

The Tomb of the Unknown Soldier in Athens: The German government has been running simulations to prepare for a possible Greek exit from the euro zone.
The German government has been simulating a range of scenarios to prepare for a possible exit of Greece from the euro zone. Under a worst-worst-case scenario, the country could descend into a vicious circle of misery that could last decades.
Info
The German government is preparing for Greece's possible exit from the euro zone in the event that the country's new government decides not to continue with the previously agreed austerity programs. Experts at the German Finance Ministry have been simulating a variety of scenarios based on different assumptions, SPIEGEL has learned.
A so-called baseline scenario is based on the expectation that the situation does not get too bad. Under this scenario, Greece's exit from the monetary union could even contribute to the strengthening of the euro zone in the long term, following an initial period of turbulence. The thinking goes that the currency union could be more stable without its weakest member.
Admittedly, peripheral euro-zone members like Spain and Italy would still face challenges, but the assumption is that they would be better able to tackle their problems without the additional burden of the Greek crisis. According to the assessment of German government experts, these countries may currently be struggling to get access to money, but unlike Greece they are not close to insolvency.
Under the Finance Ministry experts' worst-case scenario, developments in the euro zone would be less favorable. In this case, Italy and Spain would find themselves in the crosshairs of the global financial markets, and their borrowing costs would rise. In this simulation, the European backstop fund, the European Financial Stability Facility (EFSF) would be forced to supply those countries with fresh money. For this to succeed, the experts argue, the EFSF should be expanded as quickly as possible so that it has an effective lending capacity of €1 trillion ($1.4 trillion).
Vicious Circle
In addition, the government experts also looked at a so-called worst-worst-case scenario. In this model, Greece's new currency would dramatically devalue against the euro. That would have the positive effect of making the country's exports cheaper, but the negative effects would outweigh the benefits. The country's national debt would rise despite a haircut, because Greece's debts would still be denominated in euros. The country's credit rating would be immediately downgraded again, and Greek companies would struggle to get access to money because the country's banks would also be cut off from international capital markets.
Many firms would go bankrupt because their debts would also be denominated in euros, with the result that many more workers would lose their jobs. Domestic consumption would collapse, aggravating the downturn. The country could take decades to free itself from this vicious circle, and other nations might also be drawn into the vortex. The German government experts do not, however, consider this scenario to be the most likely one.
Editor's note: Visit SPIEGEL ONLINE International on Monday for the full story.
dgs/SPIEGEL


- Tony Blair : "Si la monnaie unique éclatait, ce serait catastrophique"

Tony Blair, ancien Premier ministre britannique. © Lewis Whyld / AP/Sipa
L'ancien Premier ministre britannique Tony Blair a averti, dimanche, qu'un effondrement de l'euro serait "catastrophique" et a appelé l'Europe à agir rapidement pour soutenir la monnaie unique. "Il y a des choix très, très difficiles et très douloureux à faire (...) pour stabiliser la monnaie unique. Si la monnaie unique éclatait, ce serait catastrophique", a déclaré M. Blair sur la BBC TV.
"Il est absolument essentiel pour la monnaie unique, si on veut la conserver, que l'Europe et ses institutions mettent tout leur poids dans la balance pour la soutenir", a-t-il ajouté. "Je ne sous-estime pas la difficulté de la tâche, ni l'immense problème qu'un tel engagement pose à l'Allemagne. Mais, d'un autre côté, si l'euro éclatait, ce serait un coup dévastateur pour l'Allemagne", a-t-il fait valoir. L'ancien Premier ministre a souligné la nécessité d'une "forte coordination fiscale, parallèlement à l'union monétaire, et de grandes réformes du modèle social européen".
Le Premier ministre David Cameron doit se rendre vendredi à Berlin pour rencontrer la chancelière allemande Angela Merkel et évoquer avec elle la crise dans la zone euro. "L'heure de vérité approche", avait affirmé, jeudi, le chef du gouvernement britannique. "Si les dirigeants de la zone euro veulent sauver leur monnaie, ils doivent agir maintenant", avait-il estimé, précisant que Londres se préparait "à toutes les éventualités" concernant la monnaie unique.

- Les Etats-Unis, un pays ingouvernable ?




WASHINGTON, CORRESPONDANTE - L'Amérique est-elle devenue ingouvernable ? Ses Pères fondateurs "se sont-ils plantés", comme le suggérait, fin septembre, le magazine American Prospect ? L'incapacité des responsables américains àrépondre à la crise, la paralysie institutionnelle à Washington, l'omniprésence de l'argent dans le système politique ont propagé d'angoissantes questions aux Etats-Unis sur le modèle lui-même - un phénomène assez rare dans un pays qui s'enorgueillit d'avoir donné au monde les "checks and balances", le savant système d'équilibre des pouvoirs entre le président, le Congrès et la Cour suprême qui régit la démocratie américaine depuis 1787.
La Constitution a rang de "religion", comme le disent eux-mêmes les Américains. Quand George Washington et ses amis Benjamin Franklin, James Madison et autres Pères fondateurs (Thomas Jefferson était retenu par son ambassade à Paris) se sont enfermés à l'été 1787 à Philadelphie, ils avaient conscience de faireoeuvre historique. Personne n'avait jamais remplacé la monarchie par une république.
Rédigée alors pour un pays de 4 millions d'habitants, la Constitution est aujourd'hui la plus ancienne du monde, et la plus courte - 4 400 mots. Ce qui ne l'empêche pas de faire autorité pour 300 millions de personnes. Composée d'un préambule et de sept articles, auxquels se sont ajoutés au fil des ans 27 amendements, elle définit le rôle du président et du Congrès, leur mode d'élection, et pose les grands principes sur lesquels est fondée la nation américaine : la liberté d'expression et de religion, le droit de porter des armes à feu, la présomption d'innocence...
Depuis deux siècles, les écoles de pensée s'affrontent sur l'interprétation des formules évasives dont le texte est émaillé ("châtiment cruel et inhabituel", "fouilles déraisonnables"). Et régulièrement, les tensions s'exacerbent entre le pouvoirfédéral et les Etats, que ce soit sur l'éducation, les moeurs, la peine de mort, ou les aides sociales.
"NOUS SOMMES DEVENUS L'ANGLETERRE, OU ROME"
Mais depuis l'apparition du Tea Party, mouvement radical anti-Etat et contre Barack Obama, le débat sur la Constitution est sorti des prétoires. Rarement le système a été autant questionné qu'aujour-d'hui. Rarement les Américains ont autant douté de leurs institutions. La Charte de 1787 est devenue "un document assiégé", comme l'a titré Time Magazine. Le Tea Party aurait réussi à imposer sa lecture, "l'idée que les Fondateurs ont établi un gouvernement central faible", selon Elizabeth Wydra, juriste au Constitutional Accountability Center.
Dans un livre qui vient de paraître, Republic, Lost, le professeur de droit de Harvard Lawrence Lessig résume le climat actuel : "De trop nombreux Américains ont aujourd'hui l'impression que nous n'allons pas y arriver, écrit-il. Ce n'est pas que la fin soit proche mais il semble que ce sentiment si américain de notre grandeur inévitable - culturelle, économique ou politique - s'est évanoui. Nous sommes devenus l'Angleterre, ou Rome ou la Grèce."
Ce n'est pas la première fois que la morosité atteint les Américains et il suffit derelire le discours de Jimmy Carter, en 1979, sur le "malaise" de ses compatriotes pour relativiser. Mais selon le professeur Lessig, le mal d'aujourd'hui n'affecte pas les individus mais les structures : "Notre capacité à gouverner, le produit d'une Constitution que nous avons révérée depuis plus de deux siècles, est arrivée à son terme. Le gouvernement a perdu sa capacité à prendre les décisions les plus essentielles. Lentement, nous commençons à en prendre conscience : un navire qui n'est plus dirigé est un navire qui finira par couler."

La classe politique a atteint des records d'impopularité : 89 % des Américains n'ont pas confiance en leur gouvernement. 75 % d'entre eux pensent que l'argent "achète des résultats" au Congrès. Comme le note le professeur Sanford Levinson, auteur d'un livre sur les failles de la Constitution (Our Undemocratic Constitution, Oxford University Press), le système politique souffre d'un "sérieux problème de légitimité".
"LES ETATS-UNIS ONT-ILS BESOIN D'UN PREMIER MINISTRE ?"
Comment en est-on arrivé là, trois ans après l'élection de Barack Obama ? D'abord, par un phénomène purement politique : depuis que les démocrates ont perdu leur super-majorité au Sénat, en février 2010, Washington est paralysé par un affrontement titanesque avec les républicains. Dans le Washington du gridlock("blocage"), 51 voix sur 100 ne suffisent pas pour gouverner. Il en faut 60 pourbriser les manoeuvres d'obstruction des républicains - selon une règle de procédure qui n'est d'ailleurs pas inscrite dans la Constitution. Résultat : la première puissance du monde fonctionne d'une mesure budgétaire à la suivante sans qu'aucune loi de finances ait été votée.
En plein bras-de-fer avec les républicains sur le relèvement du plafond de la dette, en août, Barack Obama a mis ses compatriotes en garde. A l'heure de la mondialisation, les systèmes politiques n'échappent pas à la compétition : "Le monde entier nous observe, a-t-il prévenu. Montrons que les Etats-Unis sont toujours la plus grande nation de la planète." Mais l'accord a minima qui est intervenu entre la Maison Blanche et le Congrès n'a pas renforcé la crédibilité de Washington. Après la dégradation de la note des Etats-Unis, le politologue Fareed Zakaria a noté que seuls les pays à régime parlementaire bénéficiaient encore du triple A des trois agences de notation (la France étant une exception car un cas hybride, selon lui). "Les Etats-Unis ont-ils besoin d'un premier ministre ?", s'est-il interrogé.
Au-delà de la conjoncture politique actuelle, les structures sont en cause. Si le Tea Party estime que la Constitution est la solution, certains en viennent à penserqu'elle fait plutôt partie du problème. "Le système de "checks and balances" avait du sens au XVIIIe siècle, quand les problèmes se développaient beaucoup plus lentement, estime Larry Sabato, professeur à l'université de Virginie. Aujourd'hui, il rend difficile la possibilité de prendre des décisions rapides." Harold Meyerson, du magazine American Prospect, rappelle que le gridlock est inscrit, de fait, dans le système d'équilibre des pouvoirs : les Fondateurs voulaient se prémunir contre tout retour à la monarchie. L'Amérique "paie", selon lui, le fait qu'elle a rédigé sa Constitution la première, un demi-siècle avant que le règne de la majorité et du suffrage universel se soit propagé. "Des institutions inspirées par les phobies antiaristocratiques de l'Amérique et ses intérêts esclavagistes - le collège électoral, le Sénat - ont survécu à des principes qui ont été oubliés. Pourtant ils nous gouvernent toujours", regrette-t-il.
Sans aller jusqu'à déclarer la Constitution obsolète, Time a fait une liste de ce que l'Amérique de 1787 ignorait : les avions, l'ADN, les virus, les ordinateurs, Lady Gaga... George Washington ne pouvait pas imaginer qu'un homme traverserait un jour l'océan dans un engin volant, rappelle l'hebdomadaire. Et pourtant on l'interroge, parmi les auteurs de la Constitution, sur la légalité des frappes de drones en Libye...
"Il est clair qu'il y a un échec. Mais une partie de notre problème vient de notre difficulté à identifier où il réside", déclare Peter Alexander Meyers, spécialiste de Jean-Jacques Rousseau et auteur d'un livre sur la démocratie à l'âge du terrorisme(Civic War and the Corruption of the Citizen). A gauche, il est devenu presque banal de relever que le capitalisme autoritaire à la chinoise n'a pas que des inconvénients quand il s'agit de répondre aux défis multinationaux tels que le changement climatique. Au point que certains progressistes plaident pour un renforcement des pouvoirs du président, comme Bruce Ackerman, constitutionnaliste à la faculté de droit de Yale, ou Peter Orszag, le premier directeur du budget de Barack Obama. Dans l'hebdomadaire de gauche The Nation, Orszag a rédigé mi-septembre une chronique qui en a fait sursauter plus d'un : "Aussi radical que cela puisse paraître, nous devons répondre à la paralysie de nos institutions politiques en les rendant un peu moins démocratiques", avance-t-il. Ou quand les démocrates plaident pour moins de démocratie...
ARCHITECTURE INSTITUTIONNELLE
D'autres trouvent au contraire que c'est la démocratie qui manque et qu'il faut un mécanisme pour limiter les tentations présidentielles. Le chercheur Chris Phillips, qui vient de sortir un livre (Constitution Café), pense que le problème est moins dans le texte lui-même que dans les pouvoirs supplémentaires que se sont arrogés les branches exécutive et législative : le président, en engageant les forces armées sans approbation du Congrès, comme en Libye, ou en signant des décrets qui précisent l'interprétation qu'il fait des lois ; ou la Cour suprême, par un pouvoir de"révision judiciaire" qui ne figure pas dans la Constitution.
Pour son livre, Chris Phillips a organisé des "discussions citoyennes" autour de l'idée de réforme. Les participants ont émis des propositions iconoclastes : rédigerune "déclaration des responsabilités", qui accompagnerait la Déclaration des droits (Bill of Rights) ; mettre fin au pouvoir de n'importe quel juge fédéral de statuer sur la constitutionnalité des lois - ce qui aboutit in fine à ce que ce soit la Cour suprême, plutôt que le Congrès, qui ait à décider de sujets hautement contentieux comme l'avortement ; ou encore limiter la pratique du secret d'Etat en incluant un membre de la presse dans toutes les délibérations confidentielles. L'heureux journaliste n'aurait pas le droit de divulguer ses scoops sur-le-champ, "mais au moins on n'aurait pas besoin d'attendre trente ans pour savoir la vérité sur l'attaque du Tonkin" (qui a donné le prétexte à la guerre du Vietnam), dit Chris Phillips.
L'architecture du système institutionnel lui-même est en question, mais plus rarement, parce que c'est l'aspect le plus émotionnel. Les Etats-Unis sont "une république et pas une démocratie", selon la formule que répète à l'envi le Tea Party : le principe "un homme une voix" ne s'applique pas uniformément (les Fondateurs voulaient contrebalancer le poids du peuple). Comme le dit Laurence Tribe, ex-mentor de Barack Obama à Harvard, cette originalité est partie intégrante de l'""exceptionnalisme" américain", ce sentiment qu'ont les Américains d'avoir un destin particulier.
L'énoncé de ces dispositions est connu. Chaque Etat gros ou petit possède deux sénateurs. La Californie, avec 35 millions d'habitants, a donc autant de sénateurs que le Wyoming, 560 000 habitants. En vertu de cette représentation, un quart du Sénat est contrôlé par des Etats qui ne représentent que 5 % de la population. Le président n'est pas élu au suffrage universel direct mais par des grands électeurs choisis dans chaque Etat. Depuis la fin de la guerre, ce système a installé à la Maison Blanche cinq hommes qui n'avaient pas remporté 50 % des voix (Harry Truman, John Kennedy, Richard Nixon, Bill Clinton et George W. Bush), critique le professeur Levinson, le doyen des constitutionnalistes américains. Le héraut de l'écologie Al Gore a été déclaré perdant en 2000 alors qu'il avait 500 000 voix d'avance sur George W. Bush. Si le système avait été différent, les Etats-Unis n'en seraient peut-être pas à se désoler de l'avance prise par la Chine dans la fabrication de panneaux solaires...
Larry Sabato est l'un des politologues réputés du pays. Avec sa "boule de cristal" de l'université de Virginie, il donne régulièrement les prévisions les plus fiables sur les résultats électoraux. Quand il a publié un livre (A More Perfect Constitution) sur la réforme de la Constitution, en 2008, les médias ne s'en sont pas souciés. "La presse américaine est surtout orientée vers l'événementiel, excuse-t-il. Pas sur le débat d'idées."
Dans son livre, il fait 23 propositions pour moderniser le système politique.Augmenter le nombre d'élus, par exemple : Au lieu de 100, le Sénat comprendrait 136 membres, ce qui permettrait de diluer le poids des petits Etats. La chambre comprendrait 1 000 membres - contre 435 actuellement -, ce qui rapprocherait les élus de leurs administrés et limiterait les coûts des campagnes électorales. Les juges fédéraux ne pourraient plus être nommés à vie. Le mandat du président serait de six ans, non renouvelable, sauf à obtenir par référendum une extension de deux ans. Cela permettrait de limiter l'effet de campagne permanente : deux ans après l'élection de 2008, Barack Obama était déjà en campagne. Il n'aura finalement pleinement gouverné que deux ans.
Larry Sabato a eu la surprise de recevoir une lettre de soutien d'un descendant de James Madison, l'architecte de la Constitution. Lequel lui a rappelé que son ancêtre avait lui-même acquiescé à l'idée de Thomas Jefferson de rafraîchir le texte tous les vingt ans. Mais les Fondateurs, s'ils n'étaient pas fermés aux aménagements, ont fait en sorte qu'il soit difficile de défaire leur oeuvre. Pour réviser le texte (il n'y a eu que 17 modifications, outre les 10 amendements de la Déclaration des droits, pour quelque 11 000 propositions), il faut une majorité de deux tiers dans les deux chambres du Congrès et une ratification dans trois quarts des Etats dans les sept ans. "Pour changer, il faudrait une crise massive, dit le professeur Sabato, une situation extrême comme une catastrophe naturelle terrible, une épidémie, une chute de météorite." Et, aux yeux de la plupart des experts, l'époque est trop agitée pour ouvrir la boîte de Pandore de la Constitution.
Corine Lesnes

- Le Fonds Européen est-il une bombe à retardement?

Les diverses mesures en tout genre qui ont été décidées depuis la création en mai 2009 du FESF ne peuvent dissimuler une réalité inquiétante. Les diverses versions de la fonction du Fonds Européen de Stabilité Financière créent une confusion et une incertitude qui expliquent la difficulté que le FESF a eu de lever 3 milliards d’euros dans de bonnes conditions. Au point d’envisager d’emprunter à court terme en décembre, ce qui n’a aucun sens.
En effet, ces capitaux, destinés à l’Irlande, ont été levés à un taux de 3,59% pour une durée de dix ans.

Ce taux est à comparer au rendement des obligations allemandes de même durée qui est de 1,80%.

A titre de référence, le rendement français se rapproche du taux de 3,50% alors qu’il y a un mois il était encore de 2,50%. L’écart se creuse entre les deux leaders de l’Eurozone.

La Belgique se situe dans la zone dangereuse de 4,47% et son nouveau Gouvernement n’est toujours pas en place : il est à la recherche d’un accord sur le budget 2012.
Cette constatation confirme ce que nous signalions depuis plusieurs mois : les investisseurs ne considèrent plus la France et le FESF comme des signatures de premier ordre, et leur notation AAA ne se traduit pas par des gains de coûts de financement comme les autres pays bénéficiant de cette note.
C’est pour cette raison que l’erreur de Standard & Poor’s sur la diffusion de la note d’abaissement de la note française n’a finalement surpris personne. Et la déclaration de la même agence de notation relative à la note du FESF ne peut cacher que les analyses concluant à la baisse des notations sont déjà dans les cartons. Ceci explique notamment la déclaration du Premier Ministre et futur Président Russe, Vladimir Putin, demandant que la Banque Centrale Europeenne se porte garante des engagements du FESF.
Mais derrière cette réalité de marché, se dessinent des inquiétudes sur la structure même du Fonds. Dans sa forme présente (440 milliards d’euros de capacité de prêts), 37% des garanties sont fournies par des pays qui sont eux-mêmes en difficultés. Depuis le 21 juillet 2011, le montant de ces garanties a été élevé à 780 milliards d’euros. L’encours actuel des prêts au Portugal et a l’Irlande atteint 12.5 milliards d’euros. Les prêts à la Grèce ne sont pas octroyés par le FESF.
La hausse du montant de prêts par le FESF décidée le 26 octobre 2011 préoccupe : en effet, même si les projets prévoient des fonds de co-investissement et un mécanisme de garantie, le crédit du FESF est basé sur celui des pays de l’Eurozone selon des quotas agréés entre les 19 Etats concernées. Imaginons que le FESF utilise effectivement la totalité de sa ligne de credit, les garanties des Etats auraient pour conséquence d’alourdir considérablement la dette indirecte des Etats Membres. A un moment où la Belgique cherche péniblement 11 milliards d’euros d’économies et où le Gouvernement Français cherche à ajouter 7 milliards d’économies aux 11 milliards déjà annoncés, le mécanisme des garanties émises par ces Etats les impacterait respectivement pour 15 et 200 milliards. D’ores et déjà, le FESF a fait savoir qu’il souhaitait que l’endettement du Fonds soit inférieur à 1.000 milliards d’euros, ce qui amènerait un effet de levier d’endettement de 4 à 5 fois ses fonds propres.
Même si la Commission Europeenne a décidé de ne pas comptabiliser ces garanties dans les calculs de la dette publique des Etats de l’Eurozone, ce risque est bien réel et pourrait provoquer une spirale de baisse des notations qui, à elle seule, affecterait celle du FESF. La hausse des moyens d’action du FESF est loin d’être inoffensive et ressemble de plus en plus à une bombe à retardement.
Au risque de me faire vilipender à Bruxelles, je pense qu’il devient urgent d’accepter la réalité. Le FESF n’est pas un emprunteur assorti d’une notation AAA. Dans ces conditions, il serait préférable de ne pas se battre pour défendre avec bec et ongles une note qui est de pur prestige puisque le FESF emprunte d’ores et déjà à un niveau équivalant à une notation AA+.
Cessons de nous battre pour des notations dont l’impact s’érode de plus en plus et portons notre attention sur les vrais enjeux : la remise en ordre des finances publiques des pays de l’Eurozone, et ce, de manière durable. Face aux 306 milliards d’euros de dette italienne qui viendront a échéance en 2012, il vaut mieux se doter d’un outil efficace et réaliste.
Mais d’abord et avant tout, définissons de manière durable le rôle et les moyens du FESF.


- Van Rompuy : la zone euro traverse une "crise existentielle"


La zone euro est confrontée à une "crise existentielle" qui doit être surmontée, a estimé vendredi 11 novembre le président du Conseil européen Herman Van Rompuy, ajoutant qu'il ferait tout son possible pour préserver son intégrité. "L'euro est un projet politique qui ne peut survivre sans des bases économiques stables et saines", a-t-il précisé.
Dans un discours prononcé à Florence, Herman Van Rompuy a estimé que la zone euro n'avait de force que celle de son maillon le plus faible et qu'il fallait mettre fin aux divergences économiques. "Nous sommes plongés dans une crise qui affecte le cœur de l'Union européenne, de l'euro. Une crise existentielle, et nous avons l'intention de la surmonter", a-t-il déclaré. "On ne peut pas avoir une monnaie commune et laisser tout le reste aux Etats concernés mais c'est pourtant ce qui s'est produit."
Il a appelé le Parlement italien à approuver la série de mesures d'austérité auxquelles le Sénat a donné son feu vert en milieu de journée, jugeant que la mise en œuvre de ces réformes permettrait au pays de regagner en crédibilité.
Les banques françaises se débarrassent de la dette italienne
Obligés de comptabiliser leurs obligations souveraines à leur valeur de marché, les établissements hexagonaux lâchent Rome.
Depuis quelques mois, les acheteurs ne se bousculent plus pour glisser dans leur portefeuille des obligations transalpines.

Qui veut encore détenir de la dette italienne ? Depuis quelques mois, les acheteurs ne se bousculent plus pour glisser dans leur portefeuille des obligations transalpines. Mercredi, le taux d'intérêt des titres à 10 ans a dépassé les 7 %, en plein doute sur l'avenir politique du pays. Si cette situation devait se maintenir longtemps, l'endettement italien, qui atteint 120 % du PIB, deviendrait de plus en plus cher à financer.
Paradoxalement, le plan du 27 octobre, censé mettre un terme à cette spirale, pourrait alimenter la défiance. Pour réinsuffler de la confiance dans le système bancaire européen, la zone euro et l'Union européenne se sont mises d'accord sur une participation accrue des banques pour alléger la dette grecque, et sur le renforcement accéléré de leurs fonds propres. Les quatre grands établissements français que sont BNP Paribas, Société générale, Crédit agricole et BPCE auront besoin, à eux seuls, de trouver 8,8 milliards avant juin 2012 - au lieu de 2017 - (même si le chiffre devrait être révisé à la baisse afin de prendre en compte leur situation exacte à fin septembre) pour atteindre un ratio de fonds propres de 9 % à cette date.
Valorisation "à valeur de marché"
Une exigence pousse les établissements à se débarrasser de leur dette souveraine à risque, comme celle de l'Italie. "Les décisions prises par les autorités européennes ont accéléré le sell-off ", témoigne Cyril Regnat, stratégiste taux chez Natixis. D'autant que pour évaluer leurs nouveaux besoins en fonds propres, l'Autorité bancaire européenne a finalement décidé de valoriser les dettes souveraines contenues dans les "books" des banques à leur valeur de marché, et non plus à leur valeur comptable, dans un souci de transparence sur leur véritable situation financière.
Une hérésie contre-productive, dénoncent les banques françaises, qui rappellent que leurs titres souverains avaient vocation à être conservés dans leur portefeuille jusqu'à leur arrivée à échéance, c'est-à-dire jusqu'au remboursement de leur valeur faciale lors de l'émission... Comme l'explique un banquier, la comptabilisation à valeur de marché "n'a aucun sens", à moins de supposer que les pays concernés sont certains de faire défaut... D'ailleurs, fait-il valoir, les obligations des États aujourd'hui en difficulté n'étaient-elles pas considérées comme parmi les plus sûres ?
Alternatives limitées
L'argument est imparable pour justifier les ventes massives de dette souveraine des pays en difficulté, quitte à aggraver la crise de la dette souveraine. Il faut dire que les banques françaises ont été échaudées par le cas grec : en 2010, lorsque Athènes a été mise sous perfusion de l'Union européenne, le ministère de l'Économie leur a demandé de se montrer solidaires en conservant leur portefeuille grec. On sait ce qu'il est advenu...
Cette fois, pas question de se retrouver dans le même scénario. BNP Paribas a réduit son exposition à celle de l'Italie de 20,5 milliards au 30 juin à 8,3 milliards le 31 octobre. Soit une baisse de près de 60 % ! Si le mouvement a commencé dès le mois de décembre 2010, date à laquelle son portefeuille valait encore 24 milliards d'euros, il s'est clairement accéléré à partir de l'été, lorsque la banque de la rue d'Antin a été, tout comme ses concurrentes, victime d'une crise de confiance en Bourse. Et il ne s'est pas limité à la dette italienne. Pour l'Espagne, l'exposition de BNP Paribas est passée de 2,7 milliards fin juin à 0,5 milliard fin octobre. À la Société générale, moins exposée que sa concurrente à la dette émise par Rome, le portefeuille d'obligations des pays en difficulté de la zone euro (Italie, Espagne, Irlande, Portugal, Grèce) est passé de 6,6 milliards en décembre 2010 à 3,43 milliards au 31 octobre.
Mise en réserve des bénéfices
À leur décharge, les banques françaises n'ont pas beaucoup d'alternatives. Encouragées par le gouvernement, qui n'a aucune envie de rouvrir un guichet public, elles veulent à tout prix éviter de recourir à l'État pour se recapitaliser. Elles sont aussi extrêmement réticentes à faire appel à l'argent des investisseurs, une solution qui aurait pour effet de diluer un peu plus leur actionnariat, et donc de le dissuader de continuer à les soutenir.
Toutes tiennent le même discours : elles s'en sortiront seules, grâce à la mise en réserve de leur bénéfice. Lors de la présentation de ses résultats au troisième trimestre mardi, la Société Générale a ainsi annoncé qu'elle ne distribuerait pas un centime de dividendes à ses actionnaires l'année prochaine au titre de 2011, une première depuis sa privatisation en 1987 !
Mais cela ne suffira pas. Les banques françaises doivent aussi se serrer la ceinture. Elles se sont engagées dans des plans de réduction de leurs activités, notamment les plus consommatrices en liquidités. Comme à BNP Paribas, où plusieurs centaines de suppressions de postes ont été annoncées la semaine dernière, "essentiellement dans la banque d'investissement et au niveau mondial", selon son directeur général Baudouin Prot.
Une chose est sûre, l'Italie devra donc trouver d'autres investisseurs.

- Eurozone bail-out fund has to resort to buying its own debt - Europe's €1 trillion (£854bn) rescue fund has been forced to buy its own debt as outside investors become increasingly concerned about the worsening eurozone sovereign debt crisis.


By Harry Wilson and Kamal Ahmed

The European Financial Stability Facility (EFSF) last week announced it had successfully sold a €3bn 10-year bond in support of Ireland.
However, The Sunday Telegraph can reveal that target was only met after the EFSF resorted to buying up several hundred million euros worth of the bonds.
Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.
The revelation will be seen as a major failure and a worrying sign of future buyers strike after EFSF officials and their bankers had spent recent weeks travelling the world attempting to persuade key investors, including China's national wealth fund and Japanese government funds, to buy its bonds.
Chinese and Japanese money was crucial to last year's first bond sales by the EFSF, but they have since been dismayed by the eurozone's failure to resolve the worsening debt crisis and alarmed at how fund has morphed from being a rescue facility for European banks into a potentially €1 trillion leveraged first-loss insurer for eurozone governments.
Other European Union funds are also understood to have supported the EFSF's bond sale. The failure of the EFSF will increase pressure on the European Central Bank to effectively become the lender of last resort for the eurozone, a move it has strongly resisted.
At a private breakfast organised by PI Capital last week, Mark Hoban, the Treasury minister, said: "What it doesn't do is provide the next stage of the solution, which is how do you stop this from happening again?" he said.
The move, by the European Investment Bank, will cause more disquiet among non-eurozone EU members who have become concerned about their growing exposure to the cost of rescuing the currency bloc.




- Tensions high amid 'Occupy' crackdowns - Portland protesters retake parks after blocking streets; officers attacked in San Francisco



Police in Denver and Salt Lake City swept anti-Wall Street protesters from their camps as demonstrators and supporters in Portland, Ore., flooded a city park area in defiance of an eviction order on Sunday.
In Portland, crowds that swelled to thousands and went toe-to-toe with police moved back onto sidewalks and downtown's Lownsdsale and Chapman squares after closing Southwest Third Avenue and Madison Street overnight.
Police in riot gear warned them they would be arrested if they didn't clear the street. At 5 a.m. PST, when parks reopened, protesters started clearing the streets, which were reopened to traffic.
Protesters cheered and chanted "this is what victory looks like" after the standoff over the eviction notice, the Oregonian reported.
One protesters was arrested and one officer was injured in the largely peaceful confrontation.
Mayor Sam Adams tweeted "Thanks to all who helped open the streets."
Adams had ordered the camp shut down, citing unhealthy conditions and the encampment's attraction of drug users and thieves.
Police numbers shifted throughout the night, but they showed no signs of moving against the protesters.
Around 4 a.m. a line of about 200 police stretched across a street and in front of a federal courthouse.
Protesters put up barricades of pallets, couches and chairs at Southwest Main Street, but they were taken down as the crowd retook the parks.
Protesters warned
For the second time in as many days, city officials in Oakland, California, warned protesters Saturday that they do not have the right to camp in the plaza in front of City Hall and face immediate arrest.
The eviction notices come as officials across the country urged an end to similar gatherings in the wake of three deaths in different cities, including two by gunfire.
Demands for Oakland protesters to pack up increased after a man was shot and killed Thursday near the encampment site.
Police officials have said a preliminary investigation suggested the shooting resulted from a fight between two groups of men at or near the encampment. Investigators do not know if the men in the fight were associated with Occupy Oakland, but protesters said there was no connection between the shooting and the camp.
The shooting occurred the same day a 35-year-old military veteran apparently committed suicide in a tent at a Burlington, Vermont, Occupy encampment. Police said a preliminary investigation showed the veteran fatally shot himself in the head. They said the death raised questions about whether the protest would be allowed to continue.
In Salt Lake City, police arrested 19 people Saturday when protesters refused to leave a park a day after a man was found dead inside his tent at the encampment.
The arrests came after police moved into the park early in the evening where protesters had been ordered to leave by the end of the day. About 150 people had been living in the camp there for weeks.
Authorities in Denver forced protesters to leave a downtown encampment and arrested four people for interfering with officers who removed illegally pitched tents, said police spokesman Sonny Jackson.
Jackson said police had advised protesters since Wednesday that their tents in Civic Center Park and on a nearby sidewalk were illegal.
San Francisco officers attacked
A clash with Occupy San Francisco protesters left one police officer slashed and a second with a torn uniform Saturday afternoon, the Contra Costa Times reported.
A woman wielding an "exacto razor blade attached to a pen or pencil-like object" slashed one officer as police tried to keep marchers at the Embarcadero near Broadway from blocking the intersection where light rail tracks are located, the Times said, citing police reports.
Also, one protester grabbed an officer's radio and a second protester blocked the officer's attempt to retrieve it, tearing his uniform and cutting his cheek in the process, the Times said.
In St. Louis, police arrested 27 demonstrators protesting economic issues at a downtown plaza early Saturday for curfew violations, authorities said.
The anti-Wall Street protesters offered no resistance as officers slipped on plastic handcuffs and walked them into police vans amid chants of "Our passion for freedom is stronger than your prison," and "Serve the people, not the state."
About 400 people had gathered at the plaza near the Gateway Arch on Friday night despite a warning from St. Louis Mayor Francis Slay that they would have to leave the park.
Slay has offered to continue talks to find a permanent place for the protest.


- Staring into the abyss

The euro crisis might wake Europe up. But more likely, argues Edward Carr, it will lead to compromise and decline

WHEN BRITAIN ABANDONED the gold standard in 1931, it was not only forsaking a system for managing the currency but also acknowledging that it could no longer bear the mantle of empire. When America broke the dollar’s peg with gold in 1971, it ushered in a decline that continued until Paul Volcker re-established confidence in the currency in the early 1980s. As Joseph Schumpeter, the great Austrian economist, once wrote: “The monetary system of a people reflects everything that the nation wants, does, suffers, is.”
In the same way, the crisis that has engulfed the European Union (EU) is about much more than the euro. As government bonds, share prices and banks swoon and global recession knocks on the door, the first fear is of financial and economic collapse. But to understand what is happening to the currency you also need to look at what is happening to Europe.
The euro will not be safe until Europe answers some fundamental questions that it has run away from for many years. At their root is how its nations should respond to a world that is rapidly changing around them. What will it do as globalisation strips the West of the monopoly over the technologies that have made it rich, and an ageing Europe starts to look increasingly like the western peninsula of a resurgent Asia?
Some Europeans would like to put up carefully designed fences around the EU’s still vast and wealthy market. Others, including a growing number of populist politicians, want to turn their nations inward and shut out not just the world but also the elites’ project of European integration. And a few—from among those same elites, mostly—argue that the only means of paying for Europe’s distinctive way of life is not to evade globalisation but to embrace it wholeheartedly.
This is not some abstract philosophical choice. It is a fierce struggle for Europe’s future, being waged in Athens as George Papandreou loses power to a temporary government of national unity, in derelict factories in France and Belgium and in the wasted lives of millions of unemployed young Spaniards. This struggle will set the limits on Europe’s welfare state. It will determine how the unbalanced partnership between Germany and France, and an increasingly detached Britain, will shape the EU. It will define the high politics of Brussels and the low politics of European populism. And it will decide the fate of the device that Schumpeter would see as the embodiment of all this: the euro.
Just now the euro zone is caught in a dismal downward spiral. Fears about whether the governments in Greece, Portugal, Ireland, Spain and, most alarmingly, Italy will honour their €3 trillion ($4.2 trillion) or so of borrowing are wrecking European banks, which own their debt. Struggling banks undermine confidence and credit. Coming on top of fiscal austerity, this is bringing on recession, deepening fears that governments will be unable to pay back their debts, which further weakens the banks. And so the vice turns, down towards disaster.
The euro zone still has the capacity to stop this run on its banks and governments. As a block, it is less indebted than America and its public-sector deficit is lower. It has the money to fortify its banks against the default of Greece—and Portugal and Ireland, if need be. And it is minded by the European Central Bank (ECB), which can in principle stand behind those vulnerable governments by buying their debt in unlimited quantities on the secondary market. But the EU has repeatedly failed to put forward a convincing euro rescue. Its latest and bravest attempt, at the end of last month, fell short of the mark—just like all the others. That is because the Europeans are deeply at odds over what the crisis is really about, and riven by disagreement over what each country must contribute towards solving it (see article). So long as the euro zone’s members cannot settle these arguments, or at least agree that their differences matter less than finding a solution, the collective action needed to defend the euro will remain impossible.
Many roads to disaster
While the world waits for Europe to make up its mind, catastrophe is in the air. It could take many forms. A country might storm out of the euro—which the treaty forbids, but who could stop a determined government? European banks might suffer a fatal loss of confidence. Italy or Spain might become unable to borrow on decent terms. Or a government trying to impose austerity might be replaced by one that rejects it. Any of these could cause contagion and plunge the world economy into depression.
Some people speculate that Germany might lead a breakaway core of euro-zone countries. But as the Teutonic euro soared in value, banks and companies would lose huge sums on their assets abroad and its exporters would find themselves at a disadvantage. Besides, for Germany to flout an EU treaty so brazenly would damage all EU law, which argues strongly against it.
Explore our interactive guide to Europe's troubled economies
Greece is more likely to buckle under austerity and quit after a succession of governments like the new one. But it would be a desperate act. Banks would collapse and capital flee, and many of Greece’s companies, unable to pay their euro-denominated bills, would go bankrupt. Already shut out of debt markets, Greece would probably lose all financial aid from the EU.
Amid recession and the contagion of a debt default, bank collapse or Greek departure from the euro, Europe’s single market would be in danger. At an EU summit in 2008, when the financial crisis was raging, Nicolas Sarkozy chastised the commission for being too zealous in upholding competition. A senior official reckons that, if the French president had at that moment asked for a vote, the heads of government would have suspended the rules. The crisis today is at least as grave as it was then.
Since it is possible to avoid such a catastrophe, you might think that the worst will not happen. And indeed it is unlikely—but not impossible. Precisely because of the dire consequences, everyone is counting on the next person to see reason. The new Greek government might reckon that Europe would never let Greece collapse. At the same time the ECB and Germany might refuse to step in, because they do not want countries to evade reform. Or perhaps austerity might eventually lead to populists that turn away from the euro—to hell with the consequences.
A euro-zone central banker confesses that he has lately been thinking about historical catastrophes such as the first world war and wondering how the world blundered into them. “From the middle of a crisis”, he says ominously, “you can see how easy it is to make mistakes.”
Economic and Monetary Union (EMU) was supposed to banish the competitive devaluations that threatened the single market in the early 1990s. It promised to bind a unified Germany into the EU and pave the way for some sort of political union in Europe. Today that dream has not vanished altogether, but the single market is under threat once more. Europe’s nations are at loggerheads, Germany is in a state of outrage, and the link between the euro and the nation state is more fraught than ever. EMU truly is, writes David Marsh, author of a history of the euro, “Europe’s Melancholy Union”.
“The 2008 crisis shows that the dominant economies were not as dominant as they thought,” says Dominique Strauss-Kahn, the French former head of the IMF. “If Europe fails, it will suffer from low growth, economic domination and cultural domination.” Can Europe turn back from the abyss? Only if the core countries will support the rest as they submit themselves to radical political, social and economic reform. Nobody should be under any illusions about how difficult that will be.


- Even as Governments Act, Time Runs Short for Euro
Kostas Tsironis/Associated Press

By NICHOLAS KULISH and STEVEN ERLANGER

BERLIN — The window of opportunity to save the euro is rapidly closing, as the sovereign debt crisis erodes the solvency of Europe’s banks and drives up borrowing rates for even once rock-solid countries like France.
On Saturday, the crisis swept away another leader, when Prime Minister Silvio Berlusconi resigned after 17 years of dominance in Italian politics to the jeers and cheers of crowds in Rome.
Both there and in Greece, jumbled parliaments came together with urgency to install more technocratic governments that are committed to delivering the difficult reforms and austerity measures demanded by the European Union, the European Central Bank and the International Monetary Fund.
Despite those drastic and tangible steps, though, there is a host of problems that could quickly overwhelm Europe’s progress.
Looming over all the discussions of reform and financing mechanisms is the slowdown in the Continent’s already anemic growth rate, to 0.5 percent in 2012, and even the threat of a double-dip recession, the European Commission said in a forecast for the euro zone last week.
That calls into doubt the adequacy of the euro zone’s latest attempt to placate the markets, the lagging effort to bolster the $605 billion European Financial Stability Facility to $1.4 trillion or to find other funding. The task will become that much harder in a recessionary environment, especially as France’s credibility with investors begins to decline.
“I think we’re in very dangerous territory, and the euro zone has to act soon,” said Simon Tilford, chief economist for the Center for European Reform in London. “There isn’t really a muddle-through option right now. And those who argue that it’s possible for the south and Italy to default or deflate into competitiveness are fanciful and flying in the face of evidence.”
The damage that can result, he said, is potentially severe “to their economies, debt burdens, social and political stability, democratic accountability, and their belief in their European allies and in the European Union itself.”
At the center of it all sits Germany, leading the bloc of Northern European countries, which also includes the Netherlands and Finland, steadfastly maintaining that austerity and fiscal rectitude on the part of the debtors, no matter how painful, represent the only path to resolving the crisis. Any proposals to share the burden with the heavily indebted countries by collectivizing European debt — even though they may have contributed to the prosperity of the northern countries by consuming their exports — are rejected out of hand, largely for fear of a political backlash.
When Germany’s council of independent economic advisers proposed to Chancellor Angela Merkel last week a way to share European debt to protect Italy and Spain, she dismissed the idea as impossible without changes to European Union treaties. She has also opposed any expansion in the European Central Bank’s role in buying up the bonds of the indebted countries, which could hold down interest rates on their debts, let alone allowing the bank to guarantee Italian debt.
But critics say there is no time for the treaty changes Mrs. Merkel is talking about; those could take years to put in place.
“The crisis must be solved right now, and it simply will not wait for these instruments to fix it,” said Bernhard Rapkay, chairman of Germany’s Social Democrats in the European Parliament.
The vulnerability of Italy — the third-largest economy in the euro zone and the fourth-largest debtor nation in the world — brought the crisis into the core of the euro zone. For all the speculation over weaker countries eventually choosing to leave the euro, there is really no euro without Italy, certainly not a euro that can be considered a common European currency.
And if borrowing becomes so expensive for Italy that it is priced out of the markets, which seemed a real possibility last week, there is no so-called wall of money big enough to bail it out or to guarantee its $2.6 trillion debt.
“We’ve entered a make-or-break scenario,” said Thomas Klau, a German who heads the Paris office of the European Council on Foreign Relations. “The present situation with Italy now is sustainable for days, perhaps weeks, but not months. This new chapter either writes the endgame of the euro zone, or it precedes a much bigger leap into political and economic integration than all those made so far.”
With each bout of uncertainty, speculative attacks come closer to the core of the European Union. Greece teeters, Italy wobbles and France begins to tremble. The precariousness of the situation was on full view Thursday when a leading ratings agency, Standard & Poor’s, mistakenly suggested on its Web site that it had downgraded France’s prized AAA rating, prompting a sell-off in French government bonds.


- Europe’s Disaster Is Headed Our Way

Can America withstand the death spiral of debt?
As an author who has just published a book on the crisis of Western civilization, I couldn’t really have asked for more: simultaneous crises in Athens and Rome, the cradles of the West’s law, languages, politics, and philosophy.
Yet most Americans are baffled by the ongoing economic pandemonium in the European Union. For them, places like Greece and Italy are primarily tourist destinations they’ll visit at most once. The finer points of Mediterranean politics leave them cold, except insofar as they’re funny. After all, who could resist the opera-buffa character of Silvio “Bunga-Bunga” Berlusconi?
But only a few weirdos really feel their pulses quicken when they hear news like: the new Greek prime minister is a former central banker called Papademos! Ever tried to explain to a New Yorker the finer points of Slovakian coalition politics? I have. He almost needed an adrenaline shot to come out of the coma.
So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China.
Until March, it seemed as if exports to Europe were on an upward trajectory. But the eurozone crisis has stopped that. Governments that ran up excessive debts have seen their borrowing costs explode. Unable to devalue their currencies, they’ve been forced to adopt austerity measures—cutting spending or hiking taxes—in a vain effort to reduce their deficits. The result has been Depression economics: shrinking economies and unemployment rates approaching 20 percent.
As a result, according to the new president of the European Central Bank, Mario Draghi, a “double dip” recession in Europe is now all but inevitable. And that’s lousy news for U.S. exporters targeting the EU market.
But there’s more. Europe’s problem is not just that governments are overborrowed. There are an unknown number of European banks that are effectively insolvent if their holdings of government bonds are “marked to market”—in other words, valued at their current rock-bottom market prices. In our interconnected financial world, it would be very odd indeed if no U.S. institutions were affected by this. Just as European institutions once loaded up on assets backed with subprime U.S. mortgages, so most big U.S. banks have at least some exposure to eurozone bonds or banks. One institution—MF Global, run by former Goldman Sachs CEO Jon Corzine—just blew up because of its highly levered euro bets. Others are biting their fingernails because it is suddenly far from clear that the credit default swaps they have bought as insurance against, say, a Greek default are worth the paper they are written on.
But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.
Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.
Athens, Rome, Washington ... The shortest route from imperial capital to tourist destination is precisely this death spiral of debt.


- The Euro Fiasco Suicide Formula (EFSF)

Posted on November 13, 2011 by Alexander Gloy
There is one simple rule for investors: avoid all things beginning with “Euro-”. Eurotunnel ended in bankruptcy. Eurodisney was a disaster for public shareholders. And so the Euro itself is following the same path.
“Euro” birds
European politicians are faced with one problem: none of their plans to end Europe’s debt crisis has worked. Absolutely nothing. Which is not that surprising – since when does adding debt solve a debt problem?
Fishing in Lake Acronym yielded only meager catches like SGP (“Stability and Growth Programme”, a paradox), SMP (“Securities Market Programme”, which has less to do with market than with manipulation), and, finally, the bazooka: the EFSF (European Financial Stability Facility).
“Stability” sounds good, and “Facility” leaves the uninitiated in the dark as to whether this is another debt pyramid and who will ultimately foot the bill.
The idea behind the EFSF must be so good the agency wants to keep it to itself and prefers not to shed light on the mechanism behind it. Based on leaked drafts and comments in the press it could look like this:
Observations:
Since Germany successfully repelled French demands for an EFSF banking license creative minds found ways of leveraging the (non-existent) funds.

The original EFSF capacity was EUR 440bn; 150bn already went to Greece, Ireland and Portugal. After 40bn inexplicably vanished, 250bn are left.
EUR 250bn is nothing compared to the funding requirements of Italy and Spain; hence it needs to be “leveraged”.

The EFSF would invest those 250bn in the “equity” (or high risk) tranche of a “Special Purpose Vehicle”. Governments, the IMF and Sovereign Wealth Funds (SWF) are supposed to gobble up the 500bn “mezzanine” (or medium risk) tranche. Together with a 250bn “low risk” tranche the SPV would have EUR 1 trillion in firepower.

This firepower is then used for purchasing “PIIGS” government bonds in primary and secondary markets. Some small change (EUR 106bn) would even be left over to recapitalize the entire European banking system.

To entice investors formerly burnt in PIIGS bonds to repeat their mistake, the SPV would issue “partial protection certificates” (PPC). Those PPC’s are in fact credit default swaps, but since politicians have blamed the latter for the consequences of their own actions they had to come up with a different name.

Credit default swaps (unless the gods at ISDA decide otherwise) at least pay out the difference between par (100%) and the recovery value. PPC’s would cover only a limited amount (20%, for example). Because, you know, a sovereign default wouldn’t bethat bad. Greece, of course, is unique and an exception. Right; so unique that RBS wrote down its Greek holdings to 37 cents on the Euro.
For the “unlikely” event of a default (a 1 in 3 chance for Italy and Spain over the next five years according to implied default probabilities) the PPC will pay out a small token (in appreciation of your stupidity) of consolation. Not in cash, however, but in EFSF bonds. This is usually referred to as “captive insurance”. It is akin to the agent selling life insurance policies on the already listing Titanic.

Not only is the insurance circular, but so are the guarantees. Keep in mind that all the EFSF has raised to far is EUR 14bn (and that money is already spoken for). Initial “guarantees” of EUr 780bn have melted down to 726bn as Greece, Ireland and Portugal have “stepped out” (they can’t participate in their own rescue). In case of “step-outs”, the maximum guarantee is reduced and remaining countries have their share of guarantees increased. It’s a game of inverse musical chairs where the last one standing loses, not wins.
The only AAA-rated countries left are Germany, France, the Netherlands, Austria, Finland and Luxembourg. The last three do not matter due to size. With the German-French 10-year government bond spread at 1.5% the market believes France is about to lose its AAA. That leaves Germany and the Netherlands, or 33% of the original guarantors. In case Italy and Spain need money, 30% of the guarantors would “step out”, at which point the self-insurance scheme collapses:
Condolences go out to the poor souls who bought the first three issues of EFSF debt at minuscule spreads to swap rates. Official lenders like the IMF (and, until the “comprehensive plan to save the Euro-zone”, the EFSF) are not supposed to take haircuts as this could cause abdominal pains with innocent taxpayers in other regions of the world. Hence the “AAA” rating for the EFSF. But during the night of October 26/27, the beautiful EFSF butterfly went into reverse metamorphosis and emerged as an ugly larvae. “Last loss” became “first loss” participation. The risk profile had been changed by the stroke of genius. And it showed in the yield spreads to German government bonds:

It therefore does not come as a surprise the EFSF had to first scale down, then postpone, then buy part of their own bonds during the recently failed auction. According to an investor presentation in August, the plan was to have 7 bond issues by the end of 2011 (3 for Ireland, 4 for Portugal). It looks like the recent (4th) might have been the final one.

In a desperate move, Klaus Regling (CEO of EFSF) announced plans to raise money via short-term bills with maturities of less than a year instead. Lend long, borrow short – even bankers understand this is a recipe for disaster.
There was an odd statement by Chancellor Merkel at the recent G20 meeting in Cannes: “Hardly any countries in the G20 have said to participate in the EFSF”. This struck me as odd, since it was the truth, and politicians are not known to tell the truth. Did Merkel suffer from the effects of an extended stay at the bar with Putin? Unlikely. This just does not fit the usual “we will do everything to save the Euro”-line. She could have said something like “I am convinced the EFSF bond issue will be fully subscribed; the demand is so high we decided keep the books open for a little bit longer”. But no, she chose to tell the truth. Maybe it had dawned on her that the EFSF was actually a formula for mass (financial) suicide and that Germany would be the one footing the bill in the end? The only way to “escape” being burdened with other countries’ debt is to “step out” of the circle of guarantors. This could actually hasten the financial crisis.
CONCLUSION: Italy and Spain are too big to be saved by Germany and the Netherlands. Merkels statement reveals a sudden “buyers remorse” by Germany. The EFSF is dead before any org-chart has seen the light of the day. All what is left to do for Germany is to play on time and to prepare for the exit from the Euro.
This entry was posted in Bond Market, Central Banks, Currencies, Economy.






- FT interview transcript: Jens Weidmann

By Ralph Atkins and Martin Sandbu
This is an edited transcript of an interview between Jens Weidmann, Bundesbank president, and Ralph Atkins and Martin Sandbu of the Financial times conducted on November 10 in Frankfurt.
Financial Times: We are at a dangerous point for the eurozone. People are now talking openly about the eurozone breaking up. Is that possible?
Jens Weidmann: For me, the eurozone as a whole is not at stake. What we face is a sovereign debt crisis that now shows contagion effects on other eurozone countries. The seriousness of that crisis is apparent, but it’s not a crisis of the euro.
The point I’m making these days is that the current approach to tackling the crisis shows inconsistencies that have repercussions on the credibility of this approach. These inconsistencies relate to the fact that we are pooling risks more and more in a framework that relies on fiscal policies decided at the national level.
We need a debate now about the future architecture of the monetary union – that is, whether one wants to move back to the Maastricht framework, which needs to be improved, or whether there is a willingness and political support to move towards a more integrated union where you delegate national sovereignty on fiscal issues to a European level.
FT: So what is the correct response to Greece?
JW: Greece has agreed on an adjustment path. We finally need to implement what has been decided. Market turmoil comes from the fact that this implementation has been questioned – and not because the plan is not credible.
FT: Was it a mistake to change the terms of the Greek private sector involvement in October?
JW: The Bundesbank has pointed out from the start, that one of the dangers of these PSI negotiations is that PSI might appear an easy way out of self-inflicted problems. If this is the case, you achieve the opposite of what you wanted to achieve. You will have more contagion instead of containment of the crisis because it’s seen as a potential model for other countries.
Once decided, reliability and trust in agreements is very important, especially in a crisis like this one – which is basically a confidence crisis. One of the effects of the renegotiation of the PSI is that the perception of sovereign risk in the market has further changed. There is now substantial private sector involvement that will apparently not trigger the credit insurance of the Greek exposure. So at least for some countries, the risk profile of their sovereign bond markets has deteriorated.
FT: But what about an involuntary writedown? If you have rules, there have to be consequences when the rules are not obeyed.
JW: All the financing that was given to Greece and was necessary to buy time for structural reform, relies on Greece sticking to the adjustment programme. If it doesn’t, the basis for this help would no longer be there – with all the consequences that entails.
FT: You talked about consequences if Greece doesn’t stick to the adjustment plan. Should that include an exit from the eurozone?
JW: That’s not a discussion that I want to join.
FT: If funding to Greece did stop, the ECB would have to decide how to deal with the Greek banking system. How should the ECB should act in that kind of case?
JW: I don’t want to speculate what would happen if somebody decided this way or another way. Regarding the role of the eurosystem [of eurozone central banks], I will just confirm to you that we will act according to our mandate and provide liquidity to solvent banks and ensure price stability – this is our task. It’s the task of governments to ensure that banks in Greece are solvent. We provide liquidity to solvent banks against adequate collateral.
FT: What’s the way out now for Italy? Yields have risen to unsustainable levels. Does Italy need a bail-out?
JW: You are rushing to conclusions in saying that the interest rate levels are unsustainable. Of course this level may not be sustainable in the long run if there is a lack of fiscal discipline and economic growth remains low. But in the short run I do not think it is such a big an issue. What we are facing in Italy is an acute confidence crisis, and only the Italian government can resolve that crisis by implementing what has been announced. Italy is very different from Greece in a lot of respects. I’m confident that Italy will be able to deliver.
FT: With its bond buying, is the ECB trying to help Rome, or put pressure on Rome?
JW: It’s not about helping Italy or penalising Italy. The ECB Governing Council has always stressed that the Securities Markets Programme is about ensuring the monetary policy transmission process., But it comes with risks. The risks are reflected in our balance sheet. There’s also a risk that you mute the incentives that come from the market. Recent experience has shown that market interest rates do play a role in pushing governments towards reforms. You have seen that in the case of Italy quite clearly.
FT: In principle, the ECB could buy up a lot more bonds and keep the yields where it wanted ...
JW: We have a mandate and we have to stick to our mandate. Fixing an interest rate for a country is certainly not compatible with our mandate. You would guarantee a certain refinancing cost for a government and you could not argue that this was not monetary financing.
The stated purpose of the SMP is to cope with dysfunctional markets and it’s not to ensure a specific spread for a specific country.
FT: Is the Italian bond market dysfunctional at the moment?
JW: What we see is a reaction to the political problems in Italy and the lack of implementation and I wouldn’t consider that as dysfunctional. You can argue whether there’s an overreaction or not, but the main reason is the political situation and the lack of implementation in Italy – and that we can’t fix.
FT: What, then, is the role of a central bank in a crisis like this?
JW: The role of the central bank is clearly defined. It is to ensure price stability and to support the competent authorities in ensuring financial stability. With this formulation, it is clear that the responsibility for financial stability lies with governments. The EFSF [the European financial stability facility] or the ESM [its successor, the European stability mechanism] are ways to buy time and, in that sense, are sensible instruments.
FT: But isn’t the problem with the eurozone that there is no stabilising anchor and only the European Central Bank can perform that function?
JW: There was such an anchor, the stability and growth pact. It was just that this pact was not respected, it was softened.
FT: Can you explain why the ECB cannot be lender of last resort?
JW: The eurosystem is a lender of last resort – for solvent but illiquid banks. It must not be a lender of last resort for sovereigns because this would violate Article 123 of the EU treaty [prohibiting monetary financing – or central bank funding of governments]. I cannot see how you can ensure the stability of a monetary union by violating its legal provisions.
I think the prohibition of monetary financing is very important in ensuring the credibility and independence of the central bank, which allow us to deliver on our primary objective of price stability. This is a very fundamental issue. If we now overstep that mandate, we call into question our own independence.
FT: The impression is that the Bundesbank will stick by principles until the whole house burns down ...
JW: Right now we’re talking about the EU treaty and I don’t see how you can build trust in a system that violates laws.
FT: Are you a pragmatist?
JW: I am president of an institution which is bound by a legal framework. We should respect the division of labour in a democracy. This has nothing to do with pragmatism or dogmatism.
FT: What if there is a conflict between Article 123 and the risk of a refinancing crisis for Italian debt?
JW: That assumes that you can address the issues in Italy with liquidity and that’s not the case. This whole debate completely blurs responsibilities. Furthermore, monetary financing will set the wrong incentives, neglect the root causes of the problem, violate the legal foundations on which we work, and destroy the credibility and trust in institutions. You won’t solve the crisis by reducing incentives for the Italian government to act.
It’s really an absurd debate in which we are telling institutions: don’t care about the law.
FT: How should the EFSF be financed? Should European countries pool their special drawing rights at the IMF?
JW: EU governments have decided how to finance the EFSF. They agreed on guarantees for the EFSF and, in their last meeting, on two options on how to leverage the EFSF – by an insurance model or a special purpose vehicle. Instead of working on implementing these approaches, we now have the next idea that is completely out of the realm of what has been discussed previously. I don’t think it builds confidence in crisis resolution capabilities if from week to week, from one meeting to the next, you are questioning your last decision.
SDRs are a part of our foreign exchange reserves. Using foreign reserves as capital of an SPV whose only purpose of is to fund governments is just a thinly-veiled form of monetary financing. For exactly that reason, the IMF itself is not allowed to do this operation.
FT: Some in Washington have suggested the ECB could lend, directly or indirectly, to the IMF, which could then help Italy. Would you rule that out as a possibility?
JW: Again, the crucial point is that the eurosystem is not permitted to lend to eurozone member states – no matter whether this is done directly or indirectly by using the IMF as an intermediary. In contrast, if you talk about regular IMF instruments the existing financing structure is preserved. The Bundesbank has always lived up to it’s responsibilities in adequately funding the IMF.
FT: How big do you think the EFSF’s lending capacity has to be to be effective?
JW: I think the EFSF has the resources to deal with the problems in the eurozone. I don’t want to say that leverage is not useful, but you just have to be aware that this is not a magic wand. Markets will look through financial engineering and it is clear that all the leverage will in the end increase the expected loss on the guarantees.
What matters is whether there is political will in the countries standing behind the EFSF to honour the guarantees.
FT: Do you think the insurance model of leverage is credible to the markets?
JW: My main concern is the credibility of the construction and the assessment of whether the guarantees are honoured. I think the insurance model has been put into question by the recent decisions on the PSI.
FT: You referred to two paths for the future of the eurozone: the return to Maastricht, or the move to fiscal union. Do you have a preference between the two?
JW: This is a genuinely political decision. The duty of the central bank is to illustrate ways that would ensure a stability-orientated basis of the monetary union. It’s up to policymakers then to make a choice between these models.
FT: Does your idea of fiscal union involve eurobonds?
JW: It does not necessarily involve eurobonds. If there was a political decision in favour of fiscal union, you could of course issue eurobonds at the end of the integration process. But this is not something I’m asking for.
In both models, you would penalise rule violations. In the Maastricht model, the rules would be the stability and growth pact, with automatic sanctions for violations and the no bail-out clause. In the fiscal union model you also need strict rules for deficit and debt. If you breached those rules you would need to delegate your national sovereignty on fiscal policy to a supranational level. I think the true question at the heart of this is: are governments, parliaments, and people ready to accept a supranational level, a European level that assumes the ultimate responsibility for fiscal policy, at least in case of a breach of the rules?
In my view, the declaration from leaders at the last EU summit was not clear enough. They talked about minor treaty changes. But this is not a minor change – this is a major change with follow-up changes in national constitutions. Without clear answers, you might not have the basis for a stability-orientated monetary union.
FT: And do you need an orderly sovereign default mechanism in either model?
JW: In the “Maastricht-plus” model, if you wanted to enforce the no bail-out clause, then of course an orderly restructuring mechanism is an important element.
FT: When you talk about a stability-orientated monetary union, is it the same as saying that other countries have to be more like Germany?
JW: No, it’s not about being more German or not being German. Fiscal solidity is not only a German issue, and the crisis has clearly revealed its importance as the basis of financial stability and political stability.
FT: With its large export surpluses, some see Germany as part of the problem for other eurozone countries ...
JW: What you have to see is that we have already had our reform process. Remember what Germany has done in reforming its labour market. What we are seeing are partly the fruits of those reforms. We all have to become more competitive.
Of course we have to recognise that imbalances are an issue. At the same time, I think this debate sometimes lacks analysis in that a surplus or deficit is, per se, not something that is always good or always bad. If you have an ageing population then a trade surplus makes sense to provision for that by accumulating capital outside your own country.
FT: Why shouldn’t Germany, which has total credibility in financial markets, loosen its fiscal stance?
JW: Germany has that credibility because it followed a specific fiscal path in the past, and it should not lose that track record and credibility by abandoning that path. It’s very important that Germany remains the stability anchor within the monetary union.
Besides, I think that the effects on the euro area of a shortlived fiscal impulse from Germany are largely overestimated.
FT: Will we see a recession in Germany?
JW: Because of reforms in the past, Germany is in a better position if you look at the growth figures. The labour market is also in a more robust position than in many other euro area countries and this is again the effect of those past reforms. The third quarter of German growth is still quite robust, but we will experience a moderation of growth in the fourth quarter of this year and the first quarter of next year. However, downside risks have clearly increased.
FT: Given the forecast for a sharp fall in inflation next year, do you see scope for further ECB interest rate cuts? Your predecessor saw 1 per cent as a floor for the main ECB interest rate. Do you see that also as a floor?
JW: I won’t speculate about the future actions by the eurosystem and limits to future action. We decreased rates because of expectations that growth forecasts would be revised downwards and inflationary pressure will recede. So currently the policy stance is appropriate.
FT: If the economy turns a lot worse and deflationary risks seem much bigger than inflationary risks, are people not going to worry that there is nothing left in the ECB toolbox?
JW: Our baseline scenario is not the one you described, but rather a deceleration in growth rates and I think our toolbox will be appropriate to cope with this. To come back to the starting point of our debate: the risk scenarios you’re talking about have a lot to do with the current sovereign debt crisis. In my view this underlines the importance of governments acting decisively