Euro Greek optimism finely balanced | as others see the Euro: Mr. Glenn Stevens’s take

This commentary is from the archive, as your commentator is on holiday. It was first published in February 2015

After yesterday’s meeting of the Eurozone Finance Ministers and others to deal with the Greek issue, things seem to be pretty much as they were. This should not come as any great surprise, as the preferred way to deal with matters such as this by the EU authorities is to buy time. They are reported to be ready to try again on Monday. No doubt there will be many back-stage efforts in the meantime.

The Euro against its major counterparts made an impressive jump towards the end of the US trading session last evening GMT, but very quickly reverted to more or less where it was before. This was on the back of a CNBC TV report in the US to the effect that a deal with Greece had been reached in principle. The report was later denied by EU sources but there does seem to be some optimism, at least for now, in the Forex market.

Mr. Glenn Stevens’s take

It is always very instructive to hear what others have to say about the whole Euro currency project, particularly when the person talking is greatly experienced in monetary matters, and a straight talking Aussie to boot.

At the same Standing Committee on Economics of the Australian Parliament where he delivered this immortal words to the effect that macro prudential policies (to curb mortgage lending) were “the latest fad, internationally”, Mr. Stevens was asked by an MP what he thought Australia could learn from the Euro experience. The Governor of the Australian Central Bank had this to say:

“That is a big question. One is tempted, I suppose, to say, 'Don't become part of a monetary union where the countries are fundamentally quite different and are not well aligned and don't actually constitute an optimal currency area.' I think part of the problem here is that not enough integration of various things had occurred in order to build the single currency on top of that. I think maybe they felt that if they did the single currency then that would help the integration happen, and in some sense it probably did, but not quickly enough. So, I think that is a factor. One might also look at some European countries, particularly some of the so-called peripheral ones, whose public finances have proven to be a vulnerability. The lesson there for us is not that that is going to happen to us; the lesson for us is: 'Don't ever let yourself get into that position. Do a good job supervising your banks. Have a flexible economy. Think about the effects of ageing. Think about what societal expectations are in terms of what the state can give them—whether they are realistic—and have a conversation about that.' With the Europeans—and I do not want to be gratuitous—I think it would have been good if all these things had received more attention in the past”.