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01-01-2011, 12:20 AM
Euro turns to problem for Eastern Europe
By: ap on: 31.12.2010 [10:04 ] (205 reads)
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Euro turns to problem for Eastern Europe
As eurozone nations are asked to help bail out others overwhelmed by debt, adopting the common currency is no longer a top priority for former communist states still outside the zone
Bells pealed and fireworks shot across midnight skies in Bratislava two years ago, as Slovaks celebrated not only the New Year but also their country’s long-sought entry to the club of nations using the continent’s common currency, the euro.
Fast forward to the dying days of 2010 – after the eurozone’s debt crisis forced the bailouts of Greece and Ireland and painful austerity measures across the region- and one thing is clear: while Slovaks will again turn out in droves on Dec 31, the cheer will have nothing to do with belonging to the euro.
The pride felt back then at being the first in the former Soviet bloc to adopt the euro has been tempered by the responsibilities that come with sharing a common European currency.
Two years ago, the euro was viewed as a safe haven of financial stability, insurance against wild swings of national currencies that could throw national budgets out of kilter and threaten economic growth. For Slovakia, it also signalled arrival into the prosperous club of EU nations just a decade after the fall of the Iron Curtain.
Now, as eurozone nations are asked to help bail out others overwhelmed by debt and the risk of contagion spreads beyond Ireland and Greece, adopting the common currency is no longer a top priority for former communist countries still outside the zone. And in newcomer countries, like Slovakia, some now see the euro as a burden, not a blessing.
“It seems that they allowed us to enter only to pay for their debts,” said Petra Hargasova, a 22-year old economics student, her hands cupped around a glass of mulled wine to fight the chill while taking in a Bratislava Christmas market.
Some in the Slovak leadership are even looking for a way out. In a recent commentary in the Hospodarske Noviny business daily, Parliament speaker Richard Sulik sent ripples across the already edgy eurozone by arguing that Slovakia should be ready to abandon the euro and switch to its former national currency.
The Finance Ministry was quick to dismiss his remarks and experts note that the quick fix proposed by Sulik would likely backfire. Economist Nicolas Veron of the Brussels-based think-tank Bruegel says that leaving the eurozone “would be economically disruptive” for the nation.
On the plus side, dropping the euro would allow a nation like Slovakia to devalue its national currency. That would help it boost its trade competitiveness against eurozone nations wrestling with the costs of the bailout and tightening their own belts.
At the same time investors are likely to punish defectors, pulling out in fear that their euro-denominated assets will be converted and devalued, to the point of possible financial collapse for the nation involved.
But anti-euro sentiment remains strong in a country that defied its partners earlier this year by refusing to provide its euro800 million ($1.05 billion) share of the euro110 billion ($145 billion) EU bailout loan for Greece.
“Everyone with common sense can see that the system is ill,” said Matus Posvanc, an analyst from the F. A. Hayek Foundation, a conservative think tank in Bratislava. He called attempts to bail out Athens futile “because Greece’s bankruptcy is inevitable.”
With euro-skepticism extending into the top levels of government, Slovakia is among the most vocal of nations pressing for new rules that would force private investors, not only taxpayers, to pay their share. Under discussion is a so-called European Stability Mechanism, which would force private creditors to do just that by allotting them a share of the bailout burden if a nation is deemed insolvent.
In refusing to pay its share of the Greek bailout package, “our main objection was ... that it was only the taxpayers who have to pay,” Slovak Finance Minister Ivan Miklos told The Associated Press. “But the banks, which contributed to the problem and made profit by providing loans to problematic countries in the past, didn’t have to pay a single cent.” “To maintain such practice means to repeat the previous mistakes,” he said. Miklos argued that the current rules undermine a trust of people in the free market economy. “The profits are privatised but the losses are socialized,” Miklos said. “When it works, a few make money, but when it collapses because they take too big a risk, we all have to pay. That’s a huge problem.”
Nigel Rendell, an economist at RBC Capital Markets in London, said Slovak concerns were understandable. “Slovakia worked incredibly hard to gain membership of the euro,” he said. “Now they find themselves having to dip into their own pockets to finance foreign governments that spent too much and should have known better.”
Other newcomers are also having doubts, while outsiders are suddenly in no hurry to join the euro club, which Rendell says is no longer seen “as a final seal of approval for completing the transition from command to market economy.” “Timetables for membership right across the region are being pushed back, perhaps even delayed forever,” he said.
Recent developments seem to back that view. Although Slovene Prime Minister Borut Pahor has defended his country’s loan guarantees for Ireland, a recent survey by the prominent polling agency Mediana indicated 67 percent of citizens were opposed. ap
http://www.dailytimes.com.pk/default.asp?page=2010\12\31\story_31-12-2010_pg4_9
http://www.iraqwar.mirror-world.ru/tiki-read_article.php?articleId=240351
By: ap on: 31.12.2010 [10:04 ] (205 reads)
(5672 bytes) [nc]
Euro turns to problem for Eastern Europe
As eurozone nations are asked to help bail out others overwhelmed by debt, adopting the common currency is no longer a top priority for former communist states still outside the zone
Bells pealed and fireworks shot across midnight skies in Bratislava two years ago, as Slovaks celebrated not only the New Year but also their country’s long-sought entry to the club of nations using the continent’s common currency, the euro.
Fast forward to the dying days of 2010 – after the eurozone’s debt crisis forced the bailouts of Greece and Ireland and painful austerity measures across the region- and one thing is clear: while Slovaks will again turn out in droves on Dec 31, the cheer will have nothing to do with belonging to the euro.
The pride felt back then at being the first in the former Soviet bloc to adopt the euro has been tempered by the responsibilities that come with sharing a common European currency.
Two years ago, the euro was viewed as a safe haven of financial stability, insurance against wild swings of national currencies that could throw national budgets out of kilter and threaten economic growth. For Slovakia, it also signalled arrival into the prosperous club of EU nations just a decade after the fall of the Iron Curtain.
Now, as eurozone nations are asked to help bail out others overwhelmed by debt and the risk of contagion spreads beyond Ireland and Greece, adopting the common currency is no longer a top priority for former communist countries still outside the zone. And in newcomer countries, like Slovakia, some now see the euro as a burden, not a blessing.
“It seems that they allowed us to enter only to pay for their debts,” said Petra Hargasova, a 22-year old economics student, her hands cupped around a glass of mulled wine to fight the chill while taking in a Bratislava Christmas market.
Some in the Slovak leadership are even looking for a way out. In a recent commentary in the Hospodarske Noviny business daily, Parliament speaker Richard Sulik sent ripples across the already edgy eurozone by arguing that Slovakia should be ready to abandon the euro and switch to its former national currency.
The Finance Ministry was quick to dismiss his remarks and experts note that the quick fix proposed by Sulik would likely backfire. Economist Nicolas Veron of the Brussels-based think-tank Bruegel says that leaving the eurozone “would be economically disruptive” for the nation.
On the plus side, dropping the euro would allow a nation like Slovakia to devalue its national currency. That would help it boost its trade competitiveness against eurozone nations wrestling with the costs of the bailout and tightening their own belts.
At the same time investors are likely to punish defectors, pulling out in fear that their euro-denominated assets will be converted and devalued, to the point of possible financial collapse for the nation involved.
But anti-euro sentiment remains strong in a country that defied its partners earlier this year by refusing to provide its euro800 million ($1.05 billion) share of the euro110 billion ($145 billion) EU bailout loan for Greece.
“Everyone with common sense can see that the system is ill,” said Matus Posvanc, an analyst from the F. A. Hayek Foundation, a conservative think tank in Bratislava. He called attempts to bail out Athens futile “because Greece’s bankruptcy is inevitable.”
With euro-skepticism extending into the top levels of government, Slovakia is among the most vocal of nations pressing for new rules that would force private investors, not only taxpayers, to pay their share. Under discussion is a so-called European Stability Mechanism, which would force private creditors to do just that by allotting them a share of the bailout burden if a nation is deemed insolvent.
In refusing to pay its share of the Greek bailout package, “our main objection was ... that it was only the taxpayers who have to pay,” Slovak Finance Minister Ivan Miklos told The Associated Press. “But the banks, which contributed to the problem and made profit by providing loans to problematic countries in the past, didn’t have to pay a single cent.” “To maintain such practice means to repeat the previous mistakes,” he said. Miklos argued that the current rules undermine a trust of people in the free market economy. “The profits are privatised but the losses are socialized,” Miklos said. “When it works, a few make money, but when it collapses because they take too big a risk, we all have to pay. That’s a huge problem.”
Nigel Rendell, an economist at RBC Capital Markets in London, said Slovak concerns were understandable. “Slovakia worked incredibly hard to gain membership of the euro,” he said. “Now they find themselves having to dip into their own pockets to finance foreign governments that spent too much and should have known better.”
Other newcomers are also having doubts, while outsiders are suddenly in no hurry to join the euro club, which Rendell says is no longer seen “as a final seal of approval for completing the transition from command to market economy.” “Timetables for membership right across the region are being pushed back, perhaps even delayed forever,” he said.
Recent developments seem to back that view. Although Slovene Prime Minister Borut Pahor has defended his country’s loan guarantees for Ireland, a recent survey by the prominent polling agency Mediana indicated 67 percent of citizens were opposed. ap
http://www.dailytimes.com.pk/default.asp?page=2010\12\31\story_31-12-2010_pg4_9
http://www.iraqwar.mirror-world.ru/tiki-read_article.php?articleId=240351