Georg Milbradt, TUD 1

Fixing of exchange rates

Virtual Eurointroduction

TatsächlicheEinführung

Interest Rates for 10 Years Gov Bonds

Quelle: Nationale Zentralbanken, H.-W. Sinn, ifo Institut, München.

%

März 2011

ItalyItaly

Germany2

4

6

8

10

12

14

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

France

GreeceGreece2,0

4,0

6,0

8,0

10,0

12,0

2009 20102008 2011

7. Mai

28. April

30. März

Germany

ItalyItalySpainSpain

FranceFrance

IrelandIreland

PortugalPortugal

GreeceGreece

Georg Milbradt, TUD 2Quelle: EEAG, 2011, S.76

Price Increase 1995 - 2009 in %

12

19

21

25

26

28

37

43

44

47

48

51

57

67

0 10 20 30 40 50 60 70 80

Germany

Austria

Finland

France

Belgium

EURO ZONE

Netherlands

Luxembourg

Italy

Ireland

Portugal

Cyprus

Spain

Greece

2

Georg Milbradt, TUD 3

Current Account Balance in % GDP (2009)

-15 -10 -5 0 5 10

-11,2Greece

-10,3Portugal

-8,3Cyprus

-5,4Spain

-3,9Malta

-3,2Slowakiai

-3,2Italy

-2,9Ireland

-2,2France

-1,0Slowenia

0,5Belgium1,3Finland

3,2Austria*4,9Germany

5,4Netherlands

5,6Luxembourg

% des BIP

* 20083

Quelle: H.-W. Sinn, ifo Institut, MünchenQuelle: H.-W. Sinn, ifo Institut, München

Georg Milbradt, TUD 4

95 96 97 98 99 00 01 02 03 04 0905 06 07 0810

20

30

40

70

80

90

100

110

120

130

60

50

IrelandIreland

UK*UK*

23. September 2009

SpainSpain

-24%-24%

-17%-17%

-16%**-16%**GermanyGermany

FranceFrance

ItalyItaly

Real Estate Prices 1996 – 2009

1th Quarter 2006 = 100

* England und Wales.

** Spain: IV Quarter 2008.

Quelle: The Economist and Social Research Institute; UK: Land Registry ; Deutschland: DESTATIS; Frankreich: INSEE; Italien: Banca d`Italia, H.-W. Sinn, ifo Institut, München

4

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-50

0

50

100

150

200

250

300

350

400Milliarden Euro

Quelle: Eurostat; EZB; Deutsche Bundesbank.

Target 2 – The Unknown Rescue Mechanism

TARGET2 Bundesbank

Accummulated current account deficits of GIPS

March 2011323 vbn Euro4th Q. 2010:

315 bln Euro

Dec. 2010: 326 bln EuroECB Money Supply

1,061 bln Euro ( 8th March 2011)

Quelle: Hans-Werner Sinn, ifo; Nichts als Zeitgewinn

5Georg Milbradt, TUD

Target 2- Balances

Quelle: Hans-Werner Sinn; Nichts als Zeitgewinn 6Georg Milbradt, TUD

ECB Purchase of Gov Bonds

IMF Rescue Package GreeceEU Rescue Package Greece

IMF with ESM

TARGET-Liabilities (only GIPS)

Guaranties (ESM)

Cash (ESM) 80

344

1480

620

250

8076

30

11525

227

1522

168

373

German Share Total Default of all GIPS-Countries

Rescue Packages -Total Liabilities

(Bln Euro)

Quelle: Hans-Werner Sinn, ifo; Nichts als Zeitgewinn

Georg Milbradt, TUD 7

Black Mail Potential• European banks – low capital-asset ratio • European Central Bank – risk of losses and

problems with reputation • Governments – fear to face situation and

fiscal consequences before the public• Loyal countries are blackmailed by the

sinners

Buying of time without solutions, problems and imbalances becoming bigger and bigger, solutions more and more expensive

Georg Milbradt, TUD 8

EU Propositions March 2011• Permanent European Stability Mechanism, higher

amount, with cash contributions, priority like IMF, no automatic participation of private creditors, breach of EU treaty legalized by amendment

• Tightened Stability and Growth Pact (speeding up, semi-automatic, inclusion of total debt and other important economic indicators), but still basic decisions by EcoFin-Council

• Euro-Plus-Pact (self commitment of governments to more convergence), no sanctions, fig-leaf

Georg Milbradt, TUD 9

• No improvement without politically accepted defaults of sovereigns and banks

• Otherwise danger of shifting the bill to the tax payers

• Extension of mistakes

Therefore institutional Improvements to avoid black mail:

• Recapitalization of banks• Restriction of the ECB to pure monetary policy• Bankruptcy regulation for states, collective action

clauses

Solutions (I)

10Georg Milbradt, TUD