Saturday, February 6, 2010

Fw: [research_Turkey] UNICREDIT: Market Sense

Just some food for thought while I am waiting for the Turkish economy panel.

Nice explanation on the difference between the gubernator and Papandreou I had mentioned on my post "Recent Hellenic Developments"

At the end, we are back at the Mary Stokes point I had relayed early in the week: Monetary union without the accompanying fiscal and political union will not make sense...

BTW, see my post on research Turkey if you would like to become a member of this newsgroup (I am on the Bberry, so no hyperlinks this time around)

Sent by BlackBerry Internet Service from Turkcell

From: Neslihan Çelik <>
Date: Wed, 3 Feb 2010 08:31:31 +0200
To: <>
Subject: [research_Turkey] UNICREDIT: Market Sense


Neslihan Çelik


From: Annunziata Marco (HVB - UniCredit Group) []
Sent: Tuesday, February 02, 2010 4:58 PM
To: undisclosed-recipients
Subject: Market Sense





Marco Annunziata

Chief Economist, UniCredit Group

Global Head of Economics, Fixed Income & FX Research


Moor House

120 London Wall



Tel. +44 207 826-1770 – Fax +44 207 826-6830

Mobile  +44 7786 660 938

From: []
Sent: 02 February 2010 06:13
To: Annunziata Marco (HVB - UniCredit Group); UniCredit - Global Economics & Fixed Income/FX Research
Subject: California Dreamin' - Market Sense


At the press conference on Thursday, ECB President Trichet will again be asked about Greece, and he might be tempted to again draw a parallel between Greece and California. He should not. True, California has a much greater weight in the US economy than Greece in the eurozone; and this in turn implies that while Greece suffers from a far higher debt/GDP ratio than California, both are negligible as a fraction of eurozone and US GDP respectively. But that is where the similarities end, and once you consider how current fiscal problems can be addressed, the differences become painfully obvious. In the US, the federal government already plays a dominant role in the economic life of individual states, it can help smooth out gradual adjustments and it has the resources to mount a rescue if needed.  In the case of the eurozone, it is far from obvious who can come to the rescue and with what resources—and how the accompanying policy conditionality would be imposed. Eurozone policymakers are clearly struggling on these issues under the nervous watch of markets. Paradoxically, it would be easier for the US to abandon California to its own devices than it would be for the eurozone to abandon Greece: contagion would be far stronger, and the eurozone has no mechanism to deal with it: there is no federal debt, no real sharing of resources. The weakness of centralized eurozone institutions will define the response to the current crisis, and it will play an even greater role in constraining long-term adjustments, which loom large for Greece, other member countries, and the eurozone as a whole; these include the burden of aging populations, but also how to generate growth without recurrent large external imbalances at the single country level. California dreamin’ cannot dispel the Greek nightmare.

Marco Annunziata
Chief Economist, UniCredit Group
Global Head of Economics, Fixed Income & FX Research

120 London Wall
Tel. +44 207 826-1770 - Fax +44 207 826-6830
Mobile +44 7786 660 938

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