Sunday, February 7, 2010

Confidence in the euro

German government economic advisor Peter Bofinger is confident that the euro will hold:
SPIEGEL ONLINE: But isn't that precisely what is needed right now? The financial problems of the southern European members are putting pressure on the entire euro zone. Some of your fellow economists fear a crash would trigger a domino effect and cause a rapid plunge in the value of the euro.
Bofinger: Some of my fellow economists are going too far. Compared to other currency zones, the euro zone is doing a lot better than many claim. The national debts and new state borrowing is lower than in the United States. And in an emergency it could also cope with a Greek bankruptcy. The country produces just 2.6 percent of the euro zone's GDP.
SPIEGEL ONLINE: Still, the loss of faith in the euro would be massive. And regarding national debt, debt within the euro zone is currently about 88 percent of its GDP. You call that figure low?
Bofinger: It is not low, but it is lower than in the US. There, the national debt is 92 percent of GDP. In Japan, it is even 197 percent. And the United Kingdom's budget deficit is far worse than that of the euro zone. And as far as a possible loss of confidence is concerned, let me point out that the state of California has been on the verge of bankruptcy for months and its share of the US's GDP is about 13 percent. Viewed from that perspective, my fear of a domino effect is limited...
Read more

No comments:

Post a Comment