May 2012: Things happen faster

One of the most oft-quoted phrases on the euro crisis is attributed to the late German economist Rüdiger Dornbusch: ‘In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.’ Following the Greek and French elections, a Dornbusch moment appears to be approaching. Not a good time for JP Morgan, the US bank that appeared to weather the financial upheavals better than most, to announce a trading loss of (at least) $2bn from trading in credit derivatives. It forced a grovelling apology from its chief executive and the dismissal (or ‘retirement’ as they like to call it) of some top New York bankers. Everything about the euro crisis is predictable and was predicted years ago by many serious people. In this issue, we try to get to the heart of the matter. Neil Courtis probes the real causes of the financial crash. Following the unsurprising election results in France and Greece, where both electorates showed disgruntlement with austerity but still voted for outcomes that are unlikely to change matters substantially, imbalances in the euro area are with us again, this time in the capital account, not the current account. Paul Betts analyses the choices facing François Hollande following his ‘getting to know you’ visit to Angela Merkel on 15 May and the unveiling of his government on 16 May, containing a pleasing combination of youth and experience.

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