3 2 mins 13 yrs

Interesting to read that Ireland is “certainly not the weakest link of the euro area,” the president of the European Central Bank (ECB) has said yesterday.

Speaking at the European-American Press Club in Paris, Jean-Claude Trichet said: “There is no weak link. The euro area is a very intertwined, single-market economy with a single currency. Speaking of any particular country in the euro area as a weak link is an error of judgment.” The German finance minister, Peer Steinbrück, suggested on Monday that members of the euro zone might have to bail out countries facing payment difficulties, though this was not foreseen in euro-zone regulations. Mr Trichet seemed to discount the possibility. “I consider that it is extremely important that each government is fully responsible for its own policies, and for its own fiscal policies particularly,” he said.

When you look at the large street protests hapening in several Euro-countries, I think Trichet is missing the central point, namely that fiscal variances are severely limited and of course monetary policy is centrally controlled in the EU. This command and control approach is going to be tested to breaking point over the next year as the EU sinks into deep recession. I also think that Ireland will suffer worst of all simply because its proximity to the sterling zone gives it additional awesome issues. It may not be the weakest link in the Eurozone yet, but is is uncomfortably close.

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3 thoughts on “THE WEAKEST LINK?

  1. You can’t identify the weakest link until the chain breaks. It is the Germans I would watch. They are being asked to bail out the people (like Ireland) who got badly drunk at the low interest-rate party and are now hungover and in debt.

    If I were a German I would not be happy.

  2. The Euro-zone is really a myth. All the countries use the Euro to be sure, but the debt is their own. If I want to buy dollar demoninated debt, I would buy US Treasuries, but for Euro’s, I get to pick which countries debt I invest in.

  3. If I were a German I would not be happy.

    Their default position. That lovely line about German humour – it is no laughing matter.

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