The new government in Greece led by far-left Syriza has introduced a note of brinkmanship and potential breakdown into dealings on European money, with reverberations that could spread around the world. For the first time, a government has taken office in a euro member country that is implacably opposed to the programme of economic structuring, spending cuts and revenue enhancement prescribed by the European Union as the recipe to heal the single currency’s malaise. The worry about Alexis Tsipras, the Greek prime minister, and Yanis Varoufakis, his composed, tough-talking finance minister, is that their policies could lead to Greece’s ejection from the euro (or, possibly, Germany’s departure). Room for compromise exists – but it is rather narrow.
Whatever the outcome of negotiations on Greece’s fate, policies applied to Athens will set a template for other euro area debtors. For all these reasons, we devote considerable space to a decisive chapter on the euro’s 15-year history. Vicky Pryce surveys the options facing the Tsipras government, which have diminished further after the European Central Bank’s decision to stop accepting Greek government paper as collateral for loans to banks. Meghnad Desai says the Athens government, now that it has won voters’ confidence, has little choice but to maintain the resistance to austerity that brought Syriza to power. On the international monetary scene, George Hoguet delivers a double bill: an essay on China’s chances of bringing the renminbi into the Special Drawing Right, and a review of former Treasury official David Mulford’s book on world monetary affairs. Darrell Delamaide explains why the Federal Reserve is now adopting patience over the long-expected tightening of monetary policy. Anthony Robinson ranges over Russia’s confrontation course in Ukraine and explores the special role played by Kazakhstan in efforts to find a solution. José Manuel González-Páramo looks at the unfinished business of European banking union.
In our emerging market round-up, coinciding with renewed interest in gold as a result of negative yields in many prime bond markets, Bronwyn Curtis and William Baunton delve into the role of developing nations’ central banks in purchases of the yellow metal. Steve Hanke investigates the parallels between today’s problems in Russia and the dilemmas that Indonesia faced in 1997-98. Philip Saunders, John Stopford, Max King and Aniket Shah say emerging market investors have to pay attention to the quality rather than simply the quantity of growth. One country where this adage needs to be put into effect, Winston Moore opines, is Bolivia. We round off with two reviews, by Niels Thygesen and William White, of Julia Leung’s book from the OMFIF Press, The Tides of Capital, containing Asian precepts for a more stable and sustainable monetary future.