Brussels’ logic is that by betting against the euro, hedge funds are driving its value down, so making it harder for hard-pressed states like Greece to balance their books, as the market is demanding. This then creates a vicious cycle of more government spending cuts being required in Greece, in anticipation of which the hedge funds bet against the euro again, and so on and on until eventually Greece is either forced out of the euro or goes bust. That\’s not a prospect Europe enjoys.
1) Some confusion here surely between the euro and Greece\’s borrowing premium?
2) A decline in the euro helps Greece balance its budget….it should stimulate export led growth, no?
3) What on earth has the value of the euro got to do with Greek governmental spending? It could, sure, if Greek debts were mostly denominated in currencies other than the euro but I\’m reasonably certain that that isn\’t the case.
4) A decline in the euro makes Greece being forced out of it less likely, not more.
No, really, I do think we should be looking to people who actually understand financial markets for ideas on what we might do about financial markets.