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Поранешниот американски секретар на државниот трезор, Џон Сноу, лично и персонално вчера во Оксфорд:
Snow Says Euro Faces ‘Tough’ Survival Without Budget
A By Jennifer Ryan
May 13 (Bloomberg) -- Former U.S. Treasury Secretary John Snow suggested the euro may not survive unless member nations agree to merge policies from budgets to labor markets.
“I hope it works, I believe in it,” Snow said in an interview late yesterday at the University of Oxford’s Said Business School in Oxford, England. “But the economist in me says that it’s going to be tough without accommodations.”
The common currency has weakened against the dollar this year amid investor concern on how indebted nations will cut budget deficits and access aid if needed. European Union officials agreed to a $1 trillion bailout this week to keep Greece from defaulting and stem a rout in government debt that jeopardized the ability of Spain and Portugal to borrow.
“For the euro to be able to survive long term, fiscal consolidation of some kind -- tax policy consolidation, fiscal policy consolidation -- is probably necessary,” he said. “But that’s not enough, you really need one labor market, one capital market. Europe is going to face hard choices in the future to make this thing work.”
The euro slid to $1.2594 as of 11:18 a.m. in London, from $1.2614 in New York yesterday. It’s fallen 12 percent against the dollar this year.
‘Canary in the Coal Mine’
Snow, who served as Treasury secretary from February 2003 to June 2006, spoke yesterday before delivering a speech. He is now chairman of Cerberus Capital Management LP.
He said turmoil in government bonds is one of the most serious problems facing the global economy. While governments can prop up failed companies, there’s no backup for states that run into trouble, and because so many nations have so much debt, it’s not clear that countries can rescue each other, he said.
“The problem is that this is so widespread, the United States has its own exposure to fiscal risk, sovereign risk, most of Europe does -- Greece is the canary in the coal mine, as they say,” he said. “Who do you turn to if we get a run on sovereign debt, who backstops it? That’s the whole problem, there isn’t a backstop.”
The International Monetary Fund can’t be relied on to rescue faltering states because it depends on donations from member countries, Snow said. Countries that refuse to get their finances in order also pose a risk to the global economy because they may start printing money to meet liabilities, which could fuel inflation and undermine debt markets linked to government bonds.
‘Hyperinflation’
“It’s a really serious problem, and you get the risk of hyperinflation, governments printing money to pay their debts, a race to see who can print first to get ahead of the others, so their currency has more purchasing power than their neighbors’,” he said. “It’s not a pretty picture. All the other paper trades off the government paper, once government paper gets into default condition, what happens to the whole debt market, the fixed-income market?”
While the EU’s rescue package gives the Greek government and leaders of other countries time to convince their citizens of the urgency of making spending cuts, it won’t shift the management of public finances onto a more sustainable path, Snow said. Cost reductions are unavoidable when monetary union prevents some countries from adopting a weaker currency to fuel exports and nations refuse to subsidize each other’s overspending, he said.
“How do they get competitive? They lower their own internal cost structure, it’s the only option available to them, he said. “They don’t have the ability to get a more competitive exchange rate, so they’ve got to do it internally. The question is, is there the political will?”
To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net
Snow Says Euro Faces ‘Tough’ Survival Without Budget
A By Jennifer Ryan
May 13 (Bloomberg) -- Former U.S. Treasury Secretary John Snow suggested the euro may not survive unless member nations agree to merge policies from budgets to labor markets.
“I hope it works, I believe in it,” Snow said in an interview late yesterday at the University of Oxford’s Said Business School in Oxford, England. “But the economist in me says that it’s going to be tough without accommodations.”
The common currency has weakened against the dollar this year amid investor concern on how indebted nations will cut budget deficits and access aid if needed. European Union officials agreed to a $1 trillion bailout this week to keep Greece from defaulting and stem a rout in government debt that jeopardized the ability of Spain and Portugal to borrow.
“For the euro to be able to survive long term, fiscal consolidation of some kind -- tax policy consolidation, fiscal policy consolidation -- is probably necessary,” he said. “But that’s not enough, you really need one labor market, one capital market. Europe is going to face hard choices in the future to make this thing work.”
The euro slid to $1.2594 as of 11:18 a.m. in London, from $1.2614 in New York yesterday. It’s fallen 12 percent against the dollar this year.
‘Canary in the Coal Mine’
Snow, who served as Treasury secretary from February 2003 to June 2006, spoke yesterday before delivering a speech. He is now chairman of Cerberus Capital Management LP.
He said turmoil in government bonds is one of the most serious problems facing the global economy. While governments can prop up failed companies, there’s no backup for states that run into trouble, and because so many nations have so much debt, it’s not clear that countries can rescue each other, he said.
“The problem is that this is so widespread, the United States has its own exposure to fiscal risk, sovereign risk, most of Europe does -- Greece is the canary in the coal mine, as they say,” he said. “Who do you turn to if we get a run on sovereign debt, who backstops it? That’s the whole problem, there isn’t a backstop.”
The International Monetary Fund can’t be relied on to rescue faltering states because it depends on donations from member countries, Snow said. Countries that refuse to get their finances in order also pose a risk to the global economy because they may start printing money to meet liabilities, which could fuel inflation and undermine debt markets linked to government bonds.
‘Hyperinflation’
“It’s a really serious problem, and you get the risk of hyperinflation, governments printing money to pay their debts, a race to see who can print first to get ahead of the others, so their currency has more purchasing power than their neighbors’,” he said. “It’s not a pretty picture. All the other paper trades off the government paper, once government paper gets into default condition, what happens to the whole debt market, the fixed-income market?”
While the EU’s rescue package gives the Greek government and leaders of other countries time to convince their citizens of the urgency of making spending cuts, it won’t shift the management of public finances onto a more sustainable path, Snow said. Cost reductions are unavoidable when monetary union prevents some countries from adopting a weaker currency to fuel exports and nations refuse to subsidize each other’s overspending, he said.
“How do they get competitive? They lower their own internal cost structure, it’s the only option available to them, he said. “They don’t have the ability to get a more competitive exchange rate, so they’ve got to do it internally. The question is, is there the political will?”
To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net
